China’s pharmaceutical market has been growing at an annual average rate of 21% over the past five years, and is set to continue rising 17% a year to 2020, say new forecasts.

Sales will rise from $98 billion in 2012 to $310 billion by 2020, by which time China is expected to be the world’s second-largest pharmaceutical market, ultimately taking the number one spot, says a study from McKinsey & Co.

The Chinese market has emerged as a major driver of revenue growth for global drugmakers, it adds. On average, China sales for the top 10 multinationals accounted for 3.8% of their global business in 2012 compared to 3% just a year earlier, while cumulative sales for the world’s top 10 drugmakers have soared from $2.5 billion in 2005 to $12.3 billion last year, notes the study, which is published in collaboration with Elsevier Business Intelligence and BayHelix Group.

Sales of individual brands in China are also rising; 85 brands of drugs topped $50 million in sales last year from just eight brands in 2005, while in 2012, the single largest-selling prescription drug brand reached nearly half a billion dollars in sales, from $110 million for the largest brand in 2005.

90% of pharmaceutical industry leaders surveyed for the study said that China is already a top five global strategic priority for their company, while 65% said it would be among their top three global strategic priorities within five years.

The study also finds that multinationals have been ramping up R&D investment, with the number of R&D centres in China having more than quadrupled, from seven to 30, in the last decade. 

Given the enormous market potential, multinationals are planning to keep up the pace of R&D investment in China, with annual spending expected to grow at a compound annual rate of 15%, says the China Association of Enterprises with Foreign Investment R&D-based Pharmaceutical Association Committee (RDPAC).

But multinational drugmakers face a number of hurdles in their quest for greater access and faster growth in China. McKinsey’s survey found that 84% of respondents cited the lack of reimbursement for innovative drugs as either a very significant or the most significant barrier to market growth in the near term. Furthermore, 74% cited intensifying pricing pressure and 70% pointed to the current slow registration process for new drugs as additional barriers to growth.