March 23, 2006

Sales of Western-style pharmaceuticals in China totaled roughly $19.2 billion in 2005, according to a new study that forecasts the country will become the fifth-largest pharmaceutical market by the end of the decade and the world's largest market by 2050.

"As incomes increase and large cohorts of China's population age, more Chinese will be able to afford imported drugs and their pharmaceutical needs, especially for maintenance drugs, will increase," according to a new report by PricewaterhouseCoopers.

Regarding various health concerns, China has a quarter of the world's smokers and 840,000 known AIDS patients. Furthermore, obesity, diabetes and lifestyle-related problems are growing rapidly among wealthier segments of the population, the report notes.

Despite the market potential, multinational firms still face significant obstacles in China that include a complex distribution system, underdeveloped retail options, intellectual property infringements and pricing controls and pressures, the report says.

For example, while expenditures on Western-style drugs comprise roughly 25 percent of China's overall healthcare spending, an estimated 97 percent of the drugs produced by local firms are generics or counterfeit, the report says. Furthermore, China's per-capita expenditure on drugs is currently less than $15. But the report concludes, "Although per-capita spending on drugs will remain an issue for multinationals, China is simply too large a market to ignore."