Abstract
China has become a major player in the pharmaceutical industry within few years, leading the production and export of API worldwide and representing a double digit growth sector in terms of healthcare services needs in the next 5 to 10 years and predicted to be the largest Pharma market in 2020. To enter this market, Big Pharma companies have adopted different strategies to tackle the challenges specific to the coun- try in terms of size, specific needs sales channels and logistics adjustments. In this paper we will discuss the market entry strategies adopted by big Pharma in China. Major Pharma players have opted for either the aggressive M&A approach to penetrate the Chinese market, gaining local insight through the acquisition of local Pharma manufacturers and the production of generic drugs in China; or for some others an innovation focused strategy through developing its R&D structure in the Mainland to capitalize on the local talent pool and the cheaper operating costs the country offers. For this paper, we have applied a various set of tools to gather data: personal observations used as primary data, reviewed secondary data: Government reports, Pharma reports, studies and related scholarly articles, press releases and specialized websites. We performed PEST analysis to demonstrate how the socio economic environment in the country and the other external factors characterizing the Mainland all contributed to the success of foreign multinational pharmaceutical companies in China.
Highlights
The pharmaceutical is a particular industry characterized by the high-risk/high-profit industry that reached its paroxysm in the 1990s with blockbuster drugs such as Plavix for Roche generating billions over the course of a decade
Big Pharma has set her eyes on China, first as a colossal market for its blockbuster drugs and licensed generic drugs manufactured locally
The outlook is positive for Big Pharma in China, especially for the ones willing to set up R&D activities in China
Summary
The pharmaceutical is a particular industry characterized by the high-risk/high-profit industry that reached its paroxysm in the 1990s with blockbuster drugs such as Plavix for Roche generating billions over the course of a decade. Some experts qualified the industry as overregulated and point it as one of the potential major threats to the Pharma industry’s players’ competitive advantage and would eventually affect the core of the R&D model in the industry by failing to be flexible and reactive to these recent changes These conditions have been aggravated by the patent expiration wave that has hit several blockbuster drugs, these drugs represented the cash cow for the Big Pharma companies who produced using exclusive in-house expertise from drug screening up until its availability in the market. The outsourcing destinations were not qualified to handle complicated and comprehensive research and development efforts within their soil (KPMG, 2011) This trend is set to change in a country like China, where Big Pharma companies do consider the opportunities arising from the huge market size and the potential benefits from selling their drugs to cater for the needs of the 1.5 billion people nation, where national healthcare coverage is a priority to be achieved by 2020. We will analyze the various socio-economic, demographic, legal and political conditions that are making China become a premium R&D outsourcing destination compatible with new imperatives the Pharma MNCs have to abide by to remain competitive and profitable
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