26 Jan 2010 07:19

Industry monitoring to promote long-term pharma growth

By Karl Zhong

Shanghai. January 26. INTERFAX-CHINA - China is starting to focus on the long-term development of its pharmaceutical industry by setting up industry-wide monitoring systems.

"China is following in the footsteps of developed countries to implement industry monitoring systems, which shows that the government and companies are realizing the importance of healthy industry developments," Xu Ming, director of the China Chamber of Commerce for Import and Export of Medicines and Health Products' general affairs department, told Interfax on Jan. 25

The chamber, along with the Ministry of Commerce's Bureau of Industry Injury Investigation, has set up a pharmaceutical industry monitoring advisory committee in late December last year. The committee will track, monitor and analyze pharmaceutical industry developments and trends which will also aid the government in formulating policies.

The committee is made up of 12 experts from government agencies, industry associations and private companies. The first batch of products to be monitored comprises of 32 products including active pharmaceutical ingredients (API) of penicillin G, paracetamol and vitamin C, ginseng, royal jelly and licorice root.

In addition, a number of key export-oriented companies such as Shijiazhuang Pharmaceutical Group Co. Ltd., Harbin Pharmaceutical Group Co. Ltd., Shandong Xinhua Pharmaceutical Co. Ltd., Shandong Lukang Pharmaceutical Co. Ltd. China Beijing Tongrentang Group Co. Ltd., Shineway Pharmaceutical Co. Ltd. and Shenzhen Mindray Bio-Medical Electronics Co. Ltd. will be monitored as well.

"Advisory reports will be issued based on the monitoring and analysis of areas such as corporate competitiveness, external funding, overseas performance and sustainability of operations," Xu said.

On Jan. 15 this year, the chamber issued its first advisory report which noted that pharmaceutical development in China for 2009 faced problems including excess production capacity and lack of competitive edge among Chinese pharmaceutical players.

The report told companies to pay attention to exports to the Netherlands, Brazil and India, countries which were within the top 20 pharmaceutical export destination countries in the first 11 months of 2009 but saw export declines of over 10 percent year-on-year each.

"Prior to the set up of the early warning mechanism, the National Development and Reform Commission and several government agencies had announced in November last year that China's vitamin API sector was experiencing an over-supply, which might lead to an influx of corporate bankruptcies," Yu Fangsheng, a pharmaceutical analyst from China Jianyin Investment Securities, told Interfax on Jan. 25.

In addition to fierce competition from domestic peers, many Chinese pharmaceutical companies viewed foreign pharmaceutical companies as a significant threat, according to Yu.

Figures from the State Food and Drug Administration's Southern Medicine Economic Research Institute showed that imported drugs and drugs produced in China by foreign companies accounted for 51 percent of China's total hospital market in 2008, with numbers hitting 60 percent in some big cities.

"Foreign companies are able to sell the same type of drugs at higher prices than domestic companies. As such, the Chinese government has taken the issue into consideration when drafting pricing policies," Yu added.

To this end, Xu emphasized that domestic companies should compete as well as cooperate with their foreign peers.

"Foreign pharmaceutical companies have contributed significantly to China's pharmaceutical industry. The current policy trend is such that China will grow to be more open to foreign companies in the future," Xu said.

According to Yu, domestic companies should make better use of their competitive advantages in API production and gradually enhance competitiveness by producing more value-added products which can be exported to developed countries.