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China Briefings

Reports on China issued by Samsung Economic Research Institute

Competitiveness and Outlook for Pharmaceutical and Medical Industries

Competitiveness and Outlook for Pharmaceutical and Medical Industries

CHOI Jin-Young, LEE Seung-Chul

Mar. 19, 2012

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Ⅰ. Pharmaceutical Industry

China became the world's fourth largest pharmaceutical market from 13th in just four years. China's pharmaceutical industry has already surpassed that of Korea's in terms of economy of scale, capability to conduct basic research and having world-class CROs. The country's four main strategies are to expand the scale of R&D, align manufacturing and approval systems, advance into the global market, and nurture large-scale companies. To that end, China aims to secure funds for R&D activities by taking advantage of its vast domestic market to nurture large pharmaceutical companies with sales revenue of US$4 billion or more and develop new drugs based on its strong capabilities to conduct basic research and pursue research projects on behalf of customers. If China's strategies are implemented as scheduled, the nation's pharmaceutical industry will far surpass that of Korea's by 2020. For their part, Korea's government and pharmaceutical companies need to place a higher priority on nurturing large-scale projects to develop new drugs, and improve both the quality and quantity of the funds created to develop new drugs. Also, they should look beyond Korea's small pharmaceutical market, and expand the methods and scope of competition, while strengthening open innovation (e.g., importing promising candidate substances for new drugs) and aggressively advancing into the global market.

Ⅱ. Medical Industry

Although China's medical service industry is growing rapidly, it lags in terms of service quality, price, and infrastructure. Problematic areas include unqualified and insufficiently trained medical service providers, exorbitant prices for medical services when compared with their per capita medical expenses and shortage of an expectable medical service infrastructure. But the growth potential of the industry has increased as the government has released a series of policies to improve the system, market, and technological capabilities. In terms of the system, the government aims at strengthening the nation's basic medical service system and improving the quality of medical facilities and relevant infrastructure. In terms of the market, the government plans to improve the nation's health insurance system and attract more overseas medical resources. As for technological capabilities, the goal is to boost investment in R&D, nurture talents, and strengthen Chinese medicine. In response, Korean companies and the government need to foster the nation's medical tourism industry in the short-term, and make efforts to set up large-scale hospitals in China and advance into China's private health insurance sector in the mid- to long-term.

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