Oncology Pharmaceutical Market in China: The Year of the Crab
This article was originally published in Start Up
Executive Summary
Cancer has overtaken respiratory and infectious diseases as the leading cause of mortality in both urban and rural China, creating an enormous demand for anti-cancer pharmaceuticals. According to "China Anti-Cancer Drug Market", a report distributed by FDC-Windhover Elsevier, the sales growth of anti-cancer drugs in China spiked from 11.1% in 2006 to 25.4% in 2007, at which point the market was worth $3.5 billion.
Cancer, in Chinese, literally means "crab," and the disease was so named because of the appearance of the spidery veins that surround a tumor and the claw-like way the disease holds on even after a tumor has been removed. The disease has spread throughout China as well; it has overtaken respiratory and infectious diseases as the leading cause of mortality in both urban and rural China, creating an enormous demand for anti-cancer pharmaceuticals. According to China Anti-Cancer Drug Market, a report recently issued by Draco Healthcare Consulting LLC, a consultancy focused on health care in China, the sales growth of anti-cancer drugs in China spiked from 11.10% in 2006 to 25.45% in 2007, when it brought in 25.45 billion RMB ($3.5 billion).
A number of factors support double-digit growth in the anti-cancer sector, as well as the pharmaceutical industry as a whole. Macro factors include changes in state policies, which benefit the pharmaceutical industry, an enormous consumer demand for pharmaceuticals driven by an aging population, improvements in living standards and insurance coverage, and low labor costs helping to create a core expertise in the large-scale manufacture of raw materials and pharmaceutical intermediates. China can manufacture about 86% of the 49 most common cancer drugs, and Chinese domestic production of commonly utilized anti-cancer drugs can satisfy its domestic market need. What’s new, however, is a shift, particularly in the cancer sector, away from generic drugs to proprietary drugs and an increase in R&D.
The research and development of anti-cancer drugs in China has been on a fast track in recent years, the Draco report says. There are more than 40 grant categories designated for anti-cancer medicine and pharmacologic research from the National Natural Science Foundation of China, goals of which include the development of natural active substrates with anti-cancer properties, the discovery of new targets, and understanding the molecular mechanisms of anti-cancer drugs. These grants largely focus on solid tumors including liver cancer, lung cancer, and nasopharyngeal cancer, all of which have a high incidence in China. Lung cancer accounts for almost 21% of all mortalities from cancer in China, closely followed by liver cancer, also accounting for almost 21% of the cancer-related mortalities. Gastric cancer is the third leading cancerous killer and esophageal cancer ranks fourth in the list of the most deadly cancers.
Hospital drug utilization is changing, causing shifts in the market shares of certain categories of anti-cancer drugs. From 2004 to 2007, the sales of hormone antagonist products have grown steadily while the sales of immunostimulants have gradually shrunk, although the latter category still leads with a 30.45% hospital market share. Plant alkaloid and other natural products represent the second leading category in terms of market share, and have remained stable, exceeding a 22% market share for four years in a row. Indeed, traditional Chinese medicines remain an expertise and a staple of the Chinese pharmaceutical industry. China has unsurpassed resources in medical plants. Since 1960, Chinese pharmacologists and scientists have developed many natural anti-cancer medicines based on traditional Chinese medicines with proven efficacy and a low rate of adverse events.
A fragmented distribution system and a lack of market concentration create both challenges and opportunities for native pharma companies as well multinationals selling into the Chinese market. Of the top 20 cancer drugs, no single product accounts for more than a 13% share of the market, and no pharmaceutical company operating in China has more than a 9% hold on the market. (See Exhibit 1.) With the world’s most enormous population, a wealth of native assets, and an increasing prevalence of the types of diseases that afflict China’s developed counterparts in the West, an anti-cancer pharmaceutical industry is rising in the East, and is at an inflection point for growth.