China changing the pharma price structure for the Chinese Welfare State – potential for global impact

 

Those who read my column may recall I wrote about the effect of China on world pharmaceuticals markets at the time of the GSK drama.

 

My point was that pay-offs were rampant in China for over 20 years and one reason it was tolerated was because it enabled the doctors to enhance their low incomes at the expense of the foreign drug companies. Of course it was the people who really paid. And it was inevitable that a good Chinese government would change this.

 

I posed the question of why China was changing that. My answer was that China was moving to create a modern welfare state as it moved away from low cost exports. That this would involve many features but one would be Made in China drugs provided at much lower prices than the western pharmaceutical companies were providing them.

 

Whilst much of the expense of the Chinese Welfare State would not be on the State budget , unlike the West, one of the key roles of Government would be to drive down costs.

 

I suggested that one lesson from GSK was all foreign and Chinese companies needed to get clean and stop corrupt acts as part of their business practices – this is part of creating a proper regulated market economy.

 

The other lesson was the beginning of the end of the high returns global pharmaceutical industry and their profit levels to fall to more normal and reasonable levels, requiring a rethink of the model of such companies.

 

That may have fallen on deaf ears. But this article below suggests things are really moving. China will, as in cars  and many other sectors , move from importer to creator. And it will do that with models that are based on lower cost models, and do not value, so highly, quarterly profits.

 

The impact of an exporting and globalising Chinese pharmaceutical sector is to be contemplated.

 

This article suggests that global pharma companies are trying everything except restructuring for lower margins in the long term.

 

The Chinese will help Western governments who are struggling under huge pharma costs, and developing nations who cannot afford pharma products  for their people’s health – surely a key human right

 

Stephen

 

 

 

http://news.yahoo.com/beijing-aims-refill-medicine-chest-made-china-drugs-005519961–finance.html

 

 



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