Animal Health to Pharma in China 2016

Animal Health to Pharma in China 2016

Much of 2016 will be focused on supporting global healthcare and life science leaders overcome business challenges that involve China. Ahead of 2016, I consider some of what is shaping our decision making.  

Public & Private Healthcare Expenditure will increase by a combined US$ 58bn in 2016, US$ 5bn more than 2014-2015 growth. The market is buoyed by  340 mn Chinese nationals defined as “middle class” by MasterCard as a Chinese urban national with US$ 6,000 – US$ 24,000 income.

The 13th Five Year Plan (2016 – 2020) is going to trigger increased opportunities and investment for all healthcare & life sciences players and a period of consolidation and M&A as a means of coping with complex healthcare demands and highly fragmented structure.

Moreover, it is likely that the 13th Five Year Plan, to be finalized in March, will advocate the full implementation of the family planning policy. This will allow all couples to have two children and will trigger a mega-cycle of business challenges and opportunities for the hospitals and healthcare market.

Medical Devices will likely see significant innovation in 2016. China has become the world‘s second largest medical device market. Based on a recent report by the China Association of Medical Device Industry (CAMDI), China‘s medical equipment market has been growing at an average of 20 percent annually since 2009 and is expected to maintain the same growth rate through 2016. In the forth coming months we expect the domestic emphasis is on research and development of products suitable for grassroots markets to substitute imported mid-to-high-end products with locally made ones.

China’s fast growing but fragmented Animal Healthcare market will continue to be characterized by growth and increased international cooperation. The increase in Chinese consumer spending has driven a strong compound annual growth rate of animal pharmaceutical sales of circa 14%, according to the China Veterinary Drug Association (CVDA). China stands out in this vertical because it is nearly self-sufficient in its production of animal vaccines. Analysts put the country’s self-sufficiency rate at around 90%. However, it isn’t quite a blockbuster industry yet. Chinese animal health firms’ sales growth is starting from a low base. In 2013, combined revenues amounted to US$ 6.5 billion. That same year, sales of the world’s top 20 firms were around US$ 23bn. Increased international cooperation is inevitable.

2016 is set to be the year that the value of pharma sales in China is expected to be greater than that in Japan, currently the world’s second-largest market. However, challenges will still exist around pricing as government involvement remains strong as a result of scoping China’s Essential Drugs List (EDL). Supply chain management will continue to be a significant quality and compliance risk. According to Reuters, as of May 2014 more than half of all drug makers operating in China were being investigated in one or more areas.

Biotech will continue to be bolstered by state support. The government’s bio-industries development plan since 2013 has started to pay off.  This strong state support has bolstered biotech companies’ efforts to grow their presence in China, and buy into biotech. Caution may well slow this sector, as an international debate continues to grow around Asian Bioethics.

It is inevitable that China will become one of the largest healthcare consumption markets in the next 10 years. Understanding how to maintain a stable and innovative lead in this this transition is a different challenge and I look forward to putting ten years of China focus behind the solution for my clients.

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