Industry Trend Analysis - Drugmaker Opportunities Restricted By Considerable Risks - JAN 2018

BMI View: Aggressive pricing policies, low levels of intellectual property protection and lim i ted capacity of regulators will pose significant challenges to drugmakers in China. While the business environment is certainly showing signs of improvement, backed by the implementation of progressive reforms, the country's pharmaceutical market will continue to be met with challenges presenting a key market access barrier for innovative drugmaker investment.

The Chinese pharmaceutical market will remain one of the most attractive markets in the Asia Pacific (APAC) region for multinational investment on account of its large market size (USD108.1bn in 2016) and the government's commitment towards improving the population's healthcare access, exemplified by the universal healthcare scheme's expansion to cover chronic diseases. Moreover, the outlook for the market is bright as the government's widespread healthcare reforms have the potential to realise the vast potential within the market ( see ' Healthcare Reforms To Shape Drugmaker Opportunities ' October 23 2017).

While we currently forecast the Chinese pharmaceutical market to expand at a robust rate in comparison to other countries within the region, we note that there are increasing downside risks to this view. Tough drug pricing environment, shortcomings in the existing intellectual property environment and sale of unregistered pharmaceuticals are likely to become more prominent issues over the coming years, resulting in an increasingly negative outlook for the market. As such, we anticipate a declaration of growth over our forecast period.

China Dwarfs Other Markets In Asia Pacific Region
LHS: Pharmaceutical Spending, 2016 (USDbn); RHS: Pharmaceutical Sales, 5-Year Forward CAGR (loccur, %)
Source: BMI

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