China’s war on corruption is overdue. Its allegations of bribery against GlaxoSmithKline are evidence that it is serious – and on Monday, the company acknowledged that some local executives appeared to have violated Chinese laws. But the anti-corruption battle is just one aspect of China’s drug market that foreign companies need to factor in. Healthcare reform and a push to build a strong local pharma industry are bigger long-term challenges.
China is Big Pharma’s fastest-growing market. GSK’s revenue there rose 17 per cent in 2012, compared with growth rates of 11 per cent in Latin America and 10 per cent in India. Novartis had sales in China that were up 24 per cent. GSK and Pfizer have big research and development facilities in the country. Novartis has the Novartis China University, where its salespeople are trained. GSK and Pfizer are among pharma groups that have alliances with local drug companies for generics or primary research, or both.
How attractive the Chinese market remains will depend on developments that are playing out simultaneously. One is the healthcare reform drive, which is accompanied by a shifting regulatory regime as new laws and decrees take effect (and which may not be implemented uniformly). Another is the focus on drug prices. Earlier this month the drug pricing agency launched yet another probe into pricing practices at international and local drug companies. GSK has now pledged to reduce its prices.