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Sustaining compeiive advantage and

brand value in the Chinese market

Leesa Soulodre is Managing Partner, RL Expert Expiring patents “patent clif,” compeiion from China’s healthcare spending is forecast to reach USD
Group LLC; Director of BluePedal Group; Global generics, and government protecionism have 1 trillion by 2020 (McKinsey, 2013). Data Monitor

Advisory Council, Cornerstone Capital; Lecturer, impacted margins. Externalized investments (2013) forecasts the market value of pharmaceuicals

Lee Kong Chian School of Business, Singapore for accelerated patent porfolio and Mergers will increase to USD 108.1 billion by 2016.
Management University.
and Acquisiions (M&As) for market access and

distribuion are fast becoming the industry’s CEO China accounts for 25.5 percent of the total
It seems that not a week goes by without another toolkit – and bribery and corrupion risks abound.
pharmaceuicals market value of the Asia Paciic

scandal in the pharmaceuical sector. The media region (DataMonitor, 2013), while Japan accounts for
is full of headlines on bribery and corrupion, tax China Opportunity
48.8 percent of this market. With rural middleclass

evasion, drug recalls, the mis-markeing of drugs, healthcare reforms and construcion of thousands of
allegaions of a lack of transparency in clinical China’s shiting disease proile is embedded in the healthcare centers, AT Kearney forecasts that China

trials and inequaliies in providing sustainable social, economic and environmental changes that could overtake Japan in the coming decade based on
access to medicines to communiies that need have swept the country over the last 30 years. its aging populaion, the rising middle class, and the

it most. So just how can Big Pharma achieve a The 2013 Ministry of Health Report (WHO) stated expected increase in non-communicable diseases

compeiive advantage in China?
that over 100 million Chinese live with diabetes. (AT Kearney, 2013).
The number of diabeic cases among Chinese

There is no quesion that while dividend returns aged 40 plus is forecast to triple over the next 20 Compeiive Landscape
are being maintained, the pharmaceuical years if prevenion and control strategies aren’t

industry is no longer as lucraive as it once was implemented. Health care reforms implemented China’s pharmaceuical market has strong buyer
for long-term investors. McKinsey (2010) reported in the new 5 Year plan support this agenda.
power, with market access afected by its fuzzy

that Research and Development (R&D) investment legal and regulatory frameworks, and prioriizaion
had doubled over the last decade, while molecular Single disease segments are paricularly lucraive. of state-owned enterprises. Rivalry is strong, cost

enity approvals have decreased.
With growing naional obesity, the Chinese control/reducion is a challenge and governments
diabetes drug market forecast will increase to dictate pricing. If the patent clif drags down

Pharmaceuical companies are now turning to more than USD 2.8 billion by 2015 (IMARCG, volumes sold, price control reduces drug prices. It is

China for its cheap access to capital and promising 2009). Today 47 percent of Chinese healthcare frequently the only strategy used by market players.
market growth rates. However, compeiive spending is in the public sector.
Developing new drugs and acquiring new patents

market forces, country risks and increasingly via M&As and Joint Ventures (JVs) are common
challenging ethical and regulatory environments Three public health insurance schemes, covering strategies to accelerate patent pipelines, achieve

make navigaing the industry more complex. Legal more than 90 percent of the Chinese populaion, verical integraion for economies of scale and
disputes and poor product quality control have merged in 2010, (AT Kearney) making them integral opimize supply chains – but these strategies are not

also eroded stakeholder trust.
to success in the pharmaceuical value chain.
only opportunisic, they are fraught with risks.
“

Pharmaceuical companies

are turning to China for its cheap

access to capital and promising

growth rates, but compeiive market

forces, country risks and increasingly

challenging ethical and regulatory
”

environments make navigaing the

industry complex.
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18 INSIGHT