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China is an Attractive Option for Pharmaceutical Outsourcing due to Low Development Costs

DUBLIN, Ireland, August 7, 2013 /PRNewswire/ --

Research and Markets ( has announced the addition of the "China Pharmaceutical Market Outlook - Government Incentives, Healthcare Reform and a Rapidly Ageing Population Provide Strong Stimulus for Growth" report to their offering.


China Becoming Pharma Production Hub

China remains an attractive target for pharmaceutical research and manufacturing, and major players from around the world are flocking to benefit from cut-price production.

The new report* states that China is an attractive option for pharmaceutical outsourcing, as drug development costs approximately 20% less than in the West, and takes less development time. Several multinational players are outsourcing to China and cutting jobs in Western regions, in order to offset financial losses from the impending patent cliff.

The Chinese boasted the third largest pharmaceutical market in the world in 2011, with an estimated value of approximately US$64 billion, and the country also represents the world's largest exporter of goods. The Chinese pharmaceutical market is currently highly fragmented, but consolidation is increasingly being sought among domestic players.

The majority of deals made in the Chinese pharmaceutical industry are mergers and acquisitions, which allow companies to integrate resources and reduce competition, while phasing out independent companies which are unable to keep up.

Many multinational companies are simply placing orders with contract research organizations and contract manufacturing organizations, but some are working closely with top domestic players. A high number of deals have taken place within the biotechnology industry, the majority with foreign companies - for instance, GSK's co-marketing agreement with Sinopharm for the distribution of its vaccines in China, or ImmunoBiology's agreement with Sinopharm to co-develop a tuberculosis vaccine.

Several multi-nationals are also completing mergers and acquisitions with domestic companies to help integrate themselves into the market. For instance, GSK has purchased Nanjin Melrul Pharmaceutical Company, and Sanofi has purchased Minsheng Pharma in order to improve its presence in the OTC market.

However, poor drug quality and flawed intellectual property laws make companies hesitant to invest in Chinese pharmaceutical firms. Although China has tightened its regulations in recent years, stories of poor drug quality continue to slip through the cracks, and intellectual property rights are also threatened.

The Chinese government implemented a new licensing law in July 2012 allowing them to issue compulsory licenses to domestic pharmaceutical companies for the manufacture of cheap generic copies of patented drugs, in the case of emergency or public interest. This could dissuade international pharmaceutical companies from investing in drug development, potentially setting back innovative drug research.

China also faces competition from popular outsourcing neighbor, India. India's labor costs tend to be lower, making the country an appealing prospect to investors, and posing a threat to China's pharmaceutical market success.

Companies Mentioned

- Harbin Pharmaceutical
- Jointown Pharmaceutical
- Nanjing Pharmaceutical
- Shanghai Pharmaceutical
- Sinopharm

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Laura Wood, Senior Manager.
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Sector: Pharmaceuticals

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