China's Big Cities Should Be First Priority For Pharma Companies - IMS

SHANGHAI- China's largest cities control the majority of the Chinese pharma market, and companies must decide city-specific sales strategies, according to the global healthcare data provider and consulting firm IMS Health.

The top 120 cities in the country cover 75 percent of the pharma market, "hence it is important for MNCs to first cover these cities," Jan-Willem Eleveld, IMS Health's VP of Consulting & Services Asia Pacific told PharmAsia News.

"For pharmaceutical companies the challenges are in deciding on which products and cities to focus, and what is the most appropriate business model to benefit best from this market," he said.

IMS predicts that the entire Chinese market will continue to grow at over 25 percent over the next few years, and Eleveld expects strong growth from oncology and chronic diseases driven by epidemiologic and demographic factors as well as changing lifestyles.

In an earlier report, IMS predicted China and 16 other "pharmerging markets" will be the biggest contributor to global growth in the next five years. According to the report, these countries will contribute 48 percent of annual market growth in 2013, up from 37 percent growth last year (Also see "Beyond BRIC: 'Pharmerging' Markets Loom If Pharma Is To Expand, IMS Study Says" - Scrip, 17 Mar, 2010.).

Last year, China became the second-largest contributor in market growth, only after the U.S. Pharmaceutical sales in hospitals within China reached $35.6 billion with a 27 percent growth rate in 2009 (Also see "China Leads Pharmaceutical Growth In 2009: Asia Pharma R&D Leaders" - Scrip, 4 Mar, 2010.).

Behind The Numbers

The strong pharma growth in China is driven by overall economic growth, epidemiologic and demographic factors and improved infrastructure and healthcare reform initiatives, Eleveld noted, since better infrastructure and more wealth allow more people to visit doctors.

For example, the prevalence of diabetes reached epidemic proportions at 9.7 percent in China. In addition, the prevalence of pre-diabetes is 15.5 percent, which means 92 million adults are estimated to have diabetes and 148 million adults have pre-diabetic conditions, according to a recent paper published in The New England Journal of Medicine.

China now is the third-largest world economy and rapidly moving closer to Japan. It is predicted to surpass the U.S. in GDP to become the world's leading economy by 2027.

Healthcare expenses in China are expected to reach $521 billion in 2014 and $659 billion in 2016, according to global consulting company McKinsey.

China announced its $124 billion healthcare reform plans last April, which aims to cover 90 percent of the population under the medical insurance in 2011. In 2003, only 30 percent of the population had medical insurance.

"The challenge for the government will be to drive execution and implementation of its healthcare reforms," Eleveld said.

China has already delayed implementation of essential drugs lists in 30 percent of public clinics due to insufficient investment from local governments and various regional problems in the provinces (Also see "China Delays Implementation Of Essential Drugs List; Analysts Say List Has Less Impact Than Earlier Predicted" - Scrip, 5 Feb, 2010.).

China's Minister Of Health Chen Zhu has called for more regional support for healthcare reform, taking provincial governments to task for not increasing investment into the healthcare while investing in other sectors (Also see "China's Minister Of Health Calls For More Regional Support For Healthcare Reform" - Scrip, 11 Mar, 2010.)).

"The healthcare [investment] is not 'burning money.' It is a most important strategy investment for the future of a nation," Chen said.

Nevertheless, the operating environment remains complex and challenging, exacerbated by increased local competition, evolving government intervention on drug pricing and uncertainty around healthcare reforms, the IMS report said.

-Dai Jialing ([email protected])