Massive investment in China’s health care system will enable the country’s pharmaceutical industry to grow 20% this year, according to Yi Jingming, an analyst at Guotai Junan Securities.

Over the next two years, up to 850 billion yuan will be pumped into the health sector as the country’s radical health reforms, which received final approval from the State Council in January 2008, are rolled out. The main plank of the reforms will be the provision of health insurance nationwide by 2011, to include a basic scheme for urban employees and a new cooperative programme for rural dwellers.

Also, drug prices will be standardised and a list of essential drugs drawn up which will be produced and sold under government control and supervision, and for which members of the insurance schemes will be reimbursed.

The first reform measure was introduced this month. It abolishes, on a three-year trial basis, the 7%-15% fees paid by patients for medicines received during hospital treatment, with the aim of reducing hospitals’ reliance on income from pharmaceuticals, which averages 50% of their total revenues.

The industry is already reported to be seeing good growth; this month the National Development and Reform Commission announced than the sector’s overall profits for January-November 2008 totalled 70.9 billion yuan, a jump of 28.4% over the same period of 2007. Value-added for the industry grew 17.9% during the first 11 months of last year, rising 16.9% year-on-year in November alone, it adds.

However, a leading economist points out that China’s practice of recording industrial growth by comparing the current period with that of the year earlier, rather than with the previous period, means that these and other official statements of growth are “highly misleading.”

“China is in a recession, regardless of what the highly-massaged official numbers claim,” says Nouriel Roubini, professor of economics at New York University’s Stern School of Business and chairman of consulting firm Roubini Global Economics (RGE) Monitor.

China’s CMOs will benefit from global downturn: study

Nevertheless, China’s contract manufacturing organisations (CMOs), whose revenues totalled more than $70 billion in 2007, are also set to show fast growth, according to a new report from Frost & Sullivan. CMOs are now seeking integration into drugmakers’ supply chains by offering value-added products and services rather than simply solving capacity problems, as they did in the past, and China’s highly active “primary” CMO sector - which includes the sourcing of raw materials, intermediates and active pharmaceutical ingredients (APIs) - is well-placed to benefit, says F&S.

Other advantages for the sector include the specialty chemicals industry’s inclusion among the six priorities set out in China's Eleventh Five-Year Plan, released in late 2006, and last November’s introduction of tax and other incentives to benefit innovative enterprises in the face of the global economic slowdown.

In fact, the recession is likely to boost Chinese CMOs further as drugmakers seek to lower their costs, particularly of drug intermediates, and firms providing higher added value will grow faster than the industry average, says F&S.