The Southern Medicine Economics Institute (SMEI) under the SFDA recently released a range of official pharmaceutical industry statistics in 2006.  We will review and analyze the data released in the following.  However, please note that the SMEI data has minor deviations (negligible differences) from official pharmaceutical industry statistics from another source, the Pharmaceutical Industry Information Station under the Shanghai Institute of Pharmaceutical Industry.  Both institutions are entrusted by the Chinese government to collect and compile official pharmaceutical industry statistics.

According to SMEI, the total output value of the Chinese pharmaceutical industry (broadly-defined) was CNY 534,570 million (US$68,535 million) in 2006, up by 17.88% over 2005. The total revenue of the Chinese pharmaceutical industry was CNY 498,899 million (US$63,961 million), up 16.93%, and the total net profits of the industry was CNY 40,182 million (US$5,152 million), up by 10.12% only. 

The following table shows the output value of various sectors within the broadly-defined Chinese pharmaceutical industry in 2006.

Source: SMEI

 

Despite continued double-digit revenue growth, the speed of Chinese pharmaceutical industry revenue growth slowed down significantly (by 9.34 percentage points) in 2006 as compared with 2005. The following table shows the sales revenues of various pharmaceutical industry sectors in 2006.

Source: SMEI

The sales growth of all sectors dropped significantly in 2006 with the API sector being the hardest hit – its growth slowed by 19.20 percentage points when compared with the previous year.  Formulated TCMs sector was the second hardest hit with 9.75 percentage points lower growth, followed by pharmaceutical chemical finished products which suffered a 8.95 percentage point drop in its growth rate.  In comparison, biological finished products sector was the least impacted among drug products with 4.71 percentage point drop in growth. 

Foreign-invested enterprises (FIEs) accounted for 27.35% of the Chinese pharmaceutical industry sales and 41.61% of the Chinese pharmaceutical chemical finished products sector sales in 2006. The following table illustrates the distribution of pharmaceutical industry sales by ownership types.

Source: SMEI

Shareholding companies is the dominant ownership type in all pharmaceutical industry sectors except medical devices.  Foreign companies are strong in the pharmaceutical chemical finished products sector and the biological finished products sector.  The share of FIEs in overall pharmaceutical industry sales rose slightly in 2006.

 

The total profits of the Chinese pharmaceutical industry in 2006 rose only 10.12% on a 16.93% revenue growth in the same year. This growth rate is significantly lower compared with the 19.00% growth the industry had in 2005. 

The following table shows the profitability of various sectors under the Chinese pharmaceutical industry.

Source: SMEI

Profit growth rates of all sectors slowed significantly in 2006 with the exception of medical devices.  The profits of pharmaceutical chemical finished products sector almost stayed the same as the previous year, despite a revenue growth of 14.64%.  Profit growth of the formulated TCMs sector and the biological finished products sector were also hit hard last year with their growth rates down by 13.35 percentage points and 12.57 percentage points. 

The share of FIEs in overall pharmaceutical industry profits rose slightly in 2006. The following table shows the profit distribution of the Chinese pharmaceutical industry by ownership types.

Source: SMEI

Foreign-invested enterprises seemed to do better with their profits compared with their local counterparts.  They accounted for 27.35%, 41.61% and 33.98% of the revenues of the overall pharmaceutical industry, the pharmaceutical chemical finished products sector and the biological finished products sector respectively, but claimed 34.84%, 47.33% and 45.76% of their profits.

 

There were 3,943 drug manufacturers (pharmaceutical chemicals and traditional Chinese medicines) in China in 2006, compared with 3,257 in 1995 and 800 in 1980. 

Most of these manufacturers are small and medium-sized enterprises. According to SMEI, large companies (over 2,000 employees, over CNY 300 million in sales or over CNY 400 million in assets), mid-size companies (300 to 2,000 employees, CNY 30 million to 300 million in sales, and CNY 40 million to 400 million in assets) and small companies (less than 300 employees, less than CNY 30 million in sales or less than CNY 40 million in assets) account for 20.0%, 42.5% and 37.5% of the pharmaceutical industry sales in 2006 respectively.  They also represent 17.7%, 49.9% and 29.7% separately of the net profits of the Chinese pharmaceutical industry in 2006.

Total sales of large pharmaceutical companies in 2006 was CNY 100.0 billion, up 5.5%, that of mid-sized pharmaceutical companies was CNY 212.6 billion, up 12.8%, and that of small companies was CNY 187.4 billion, up 30.6%.

Total net profits of large pharmaceutical companies in 2006 was CNY 7.0 billion, down 4.0%, that of mid-sized pharmaceutical companies was CNY 19.8 billion, up 4.97%, and that of small companies was CNY 12.9 billion, up 32.5%.

While mid-size companies contributed the most revenues and profits to the Chinese pharmaceutical industry in 2006, small companies enjoyed the fastest growth in sales and profitability in the same year.  However, mid-size companies had the highest profit margin in the industry. Large companies, however, lagged behind in both profitability and growth in 2006.

 

The following table shows other performance data on various sectors of the Chinese pharmaceutical industry in 2006.

Source: SMEI

The sector of pharmaceutical chemical finished products has the highest percentage of loss-making enterprises and the lowest profit margin among all finished drug products.

 

Jiangsu province is the biggest pharmaceutical industry in China both by sales and net profits. The following table shows the top ten provincial pharmaceutical industries by sales in 2006.

Source: SMEI

The top 10 provincial pharmaceutical industries account for 67.78% of the total revenues of the Chinese pharmaceutical industry.  Some of the provinces, including Henan, Shandong and Sichuan, had above-average growth in 2006. Henan province pharmaceutical industry experienced sharp growth of 40.00% in sales and 70.55% in profits last year. 

 

In the first two months of 2007, the profits of the Chinese pharmaceutical industry rose sharply by 26.37% reaching CNY 4,529 million, according to official statistics.  The revenues of the industry rose 15.94% during the period reaching CNY 63,513 million. 

The profits of the pharmaceutical chemical finished products sector rose particularly fast in the first two months of 2007 at 30.49%, despite more price cuts on drug products in the period.  However, the government price cuts in the period targeted mainly common-used generic drugs, and were benign on new and originator drugs.  In some cases, NDRC even raised prices of selected new drugs.