Similarly, Roche has unveiled its fifth global R&D center on the outskirts of Shanghai. Novartis is collaborating with a
leading Chinese R&D institute and is establishing an alliance with another Chinese biotech on other projects. In an effort
to make its products more accessible to local residents, Pfizer has established a regional headquarters in Shanghai and is
considering its own R&D center in China.
Investments like these become even more critical and the market opportunity more compelling as chronic disease rates rise
in China with the increase of affluence. Greater prosperity often leads to lifestyle changes—for example, richer, less healthy
diets—and a consequent increase in chronic diseases such as diabetes, cancer, and heart disease. By 2025, for instance, China
will have 38 million diabetes patients, almost double what is projected for the United States, and about 13 percent of the
global diabetic population. As China's populaton ages and people move from rural settings to more sedentary urban centers,
chronic disease will grow.
Companies need to expand their efforts outside of large, tier-one cities such as Beijing, Shanghai, and Guangzhou. Today,
companies can reach 80 percent of the hospital market in China by focusing on just 120 out of 665 cities. However, this dynamic
is changing rapidly, so first steps must be taken toward China's future markets by understanding the shift from tier one to
tiers two and three.
The real future growth will occur in cities in tiers two and three, to which rural populations are migrating. These regional
centers, like Hangzhou, Shenyang, Jinan, and Tianjin, for instance, have become the key markets for highly successful drugs
like Bo Le Xin, a generic version of the anti-depressant Effexor.
Improving customer base segmentation and daily call rates will also drive future growth. Segmenting by message content will
also help, so that doctors who respond to efficacy or patient compliance arguments do not receive promotions based primarily
on low cost. Significant growth can be driven from minimum frequency rates of one call per week on very-high-value targets
and one call every two weeks on high-value targets.
All of this is easier said than done. As employers grapple with high turnover, they need to expand their talent pool into
rural environs. They must invest in higher salaries, more rigorous training, and richer benefits to inspire loyalty among
employees already accustomed to annual salary increases of up to 20 percent. Robust human resources programs that attract
and retain top-shelf talent help companies accelerate market penetration. The companies that succeed in China will not necessarily
be those with the best products. They will be companies that have marshaled the resources to execute a consistent, cohesive
plan. Senior management will have to be stable. Their strategy must be informed by market-specific intelligence. And the company
must be willing to forge alliances with the government.
China is the future pharmaceutical market. Companies that succeed in China will achieve higher growth rates than in mature
markets around the world. Industry leaders are investing in China now. Posing the world's biggest strategic challenges, the
market also promises the richest rewards.