China Life Sciences Industry 2012

by Gearoid Cronin, Commissioning Agents International Inc.

China is the world’s most populous country with 1.34bn inhabitants, and its economic rise is well documented. With 8.7% growth in 2011 coming after a sustained growth that has seen GDP rise seventeen-fold in 20 years, China is now the world’s second largest economy. It is still a developing country, however, with GDP per capita less than 10% of that of the USA.

Along with the rest of the economy, China’s life science market has grown dramatically, now accounting for 5.6% of the global market. By 2015 it is expected to be the world’s second largest market after the USA.

Additionally, China is in the midst of revamping its healthcare infrastructure and has spent US$173bn on healthcare in the last two years as part of the China 2020 Vision.

China has publically targeted a modernisation of its regulatory structure with the SFDA publishing a new set of GMPs effective from March 2011. These GMPs are immediately effective for all new plants and existing facilities have a period of five years to implement the required standard.

This tightening of standards comes after several safety controversies and, dramatically in 2007, a corruption scandal involving the head of the SFDA who was later executed for taking bribes to approve substandard medicines resulting in patient deaths.

Contrasting widely discussed fears of IP loss, China is in the midst of an exciting R&D expansion and is attracting investment from both foreign and local firms with specialised high-technology parks such as Zhangjiang Hi-Tech Park in Shanghai, and Zhonguancun National Innovation Demonstration Zone in Beijing.

Residents of these parks, as well as others at Tianjin, Hangzhou and Suzhou include; Pfizer, Novo Nordisk, Eli Lilly, Baxter, GSK, Servier, Siemens, Merck, Sanofi, Roche, ADM and more.

In the midst of the present boom China is facing some daunting inflationary challenges. For example; Shenzhen and Beijing recently increased 2012 minimum wages by 15.9% and 8.6% after double-digit increases in the previous two years.

A recent trend in China is for companies and foreign investors, especially manufacturers, to move westward in search of lower costs as the eastern seaboard and southern provinces experience sharp increases in cost.

Adding to costs of foreign owned enterprises China recently introduced a new tax on foreign workers and their employers that may cost as much as US$10,500 per capita to forcibly participate in the country’s social welfare programs.

That said, it should be noted that China still has low wages by western standards. The minimum wages for Shenzhen and Beijing are both under US$250 per month.

The outlook for 2012 and beyond: China is still a source of enormous opportunity for foreign drug companies and device manufacturers. However, it is not without risk and China’s relatively lax implementation of IP law has been widely discussed in western media.

Despite concerns that Chinese antitrust enforcers may be pressured by domestic industry to restrain foreign IP holders from enforcing their IP rights against Chinese competitors the prize seems worth the risk.

China’s colossal healthcare expenditure, coupled with a burgeoning middle class and the rise of chronic disease disorders, presents a platform for double-digit growth that cannot be matched in western economies.

About Diarmuid Sexton

Diarmuid is Adroit People’s Managing Director and HR Practice Leader. Since 2001 Diarmuid has worked with clients in the medical device, pharmaceutical, legal and ICT sectors in Europe, Asia, Australia and the US providing strategic HR, recruitment and outplacement support.

His experience ranges from workforce planning to executive search, performance management and redundancy / career transition across technical, legal and commercial disciplines.

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