With a population of 1.3 billion and aggressive government healthcare reforms, China's untapped market has pharma execs licking
their chops. As pharmaceutical sales in Western Europe and North America tally single-digit growth, the stats for this rising
tiger are exploding—with a compounded annual growth rate of 22.6 percent from 2003 to 2008, reaching $24.5 billion. China's
pharmaceutical market, which was the world's eighth largest in 2006, is projected to climb to third place by 2013. By 2020,
China is set to be the world's largest economy, with GDP growth steadily rising faster than other pharmerging countries like
Brazil, India, and Russia.
HEALTHCARE REFORM CHINA-STYLE
High-Speed Healthcare Reform
At the center of China's healthcare metamorphosis is its $125 billion stimulus package, which aims to offer health coverage
to more than 90 percent of China's population by 2011. The government plans to invest that $125 billion in the next three
years to provide basic, affordable healthcare services for the public (see "Healthcare Reform China-Style," this page). This
capital will be directed at medical insurance (46 percent), healthcare organization (47 percent), and public health (7 percent).
Healthcare coverage will expand greatly; essential drugs will be reimbursed by insurance, and the price of essential drugs
will be determined by tenders with no distribution margin. More than 2,000 county hospitals and clinical centers in rural
areas will come online, along with improved capabilities at existing community hospitals, support for specialized hospitals,
and experimentation on the elimination of the hospital drug markup. There will be an increased focus on disease prevention
and better control of the spread of infectious disease.
Enlarging the population covered under basic health insurance is projected to help double the size of China's pharmaceutical
market over the next five years. It's estimated that the essential drug list will comprise some 400 drugs, about half of which
contain chemical molecules currently sold by global pharmas. As the government works to reduce pressure on overcrowded city
hospitals by building new ones, these hospitals will also purchase more equipment—in turn, promoting better prevention and
earlier diagnosis of conditions such as cancer, cardiovascular disease, hepatitis, and diabetes. Medical equipment, diagnostic
reagents, and vaccine manufacturers will benefit from this massive initiative.
OUT OF POCKET INSIDE CHINA
Launching a Global Brand in China
More often than not, "building the market," rather than "taking share from the competition," is the name of the game for launching
pharmaceutical products in China.
There was once a logical sequence for those who led pharmaceutical companies. US-based companies sought to penetrate the US
market first, pursue Europe second, and the rest of the world would follow. European companies, for their part, prepared dossiers
and launches for their own continent before turning their sights on the US, with the rest of the world again a minor consideration.
But with China now on the verge of entering top-five status, such myopia no longer serves. True, the market is evolving rapidly.
True, historical information is limited; key data are still emerging. But companies that do not broaden their drug development
and launch planning process to include in-depth, early-on analyses of China are shortchanging themselves.
1 Engage As Early As Possible
Global brand development teams should begin tracking a new product's potential in China in Phase II or III. There are more
than enough questions to answer: What would it take to sell a product in China, and what are the potential rewards? What might
be the business opportunity? What steps must be taken now—in the laboratories, with clinical, regulatory as well as commercial
departments—to ensure timely registration and commercialization? How well are Chinese physicians positioned to treat the disease
targeted by the product? What do patients understand about their own condition? How must the development program be adjusted
to account for anticipated clinical requests of local health authorities? Which potential joint-venture partners might be
contacted, which suppliers might be tapped, which distribution networks would help facilitate?
Local teams can provide the on-the-ground analyses of specific disease states that US- and Europe-based managers need. They
should be brought into the development and launch cycle early, as key members of the team.
2 Become Truly Global
At the same time, organizations must undertake the realignments necessary to fully leverage the China market. This will entail
reconfiguring operating committees so that they are truly global in orientation and reach—respectful of the data and insights
of regional players, cognizant of cultural differences, and united by a shared desire to make the most of these "far away"
and often "unknown" emerging markets. Systems must be put into place so that clinical development objectives are aligned with
commercial realities. A common understanding of potential drivers, key success factors, and resource allocation must be used
as a guiding framework. Seamless, fully integrated organization is the mandate of this age.
3 First Build the Market
The business of tapping a market such as China's isn't as simple as unveiling a first-to-market product—even if research demonstrates
a huge potential market of millions of people for the compound. Such markets must first be built. Physicians and patients
must be educated—especially about common conditions such as cardiovascular disease, diabetes, and hepatitis, which can remain
essentially asymptomatic for a long time before doing serious damage. Products must be made available not just at key city
hospitals but at the fast-growing network of community hospitals, where more patients are likely to seek care in the future.
Affordability also remains a key factor, as US and European prices are likely to prove incompatible with the Chinese economy.
Most patients in China still pay out of pocket for their healthcare. Too often drugmakers address this pricing issue too late—after
having already launched a product in the US or Europe, at which point they find themselves in the awkward position of having
to sell it at international price levels to a limited audience while hastily putting into place various charity programs designed
to address the medically needy.
In conclusion, launching a global brand in China means treating the nation as what it potentially is—the locus of the next
generation of blockbuster products. —RH & MC