Foreign firms reap 60% of China's healthcare stimulus

Experts on China have a cautionary bit of advice for drugmakers: The devil is in the details. On a top-line basis, China's pledge of a $125 billion investment in healthcare this year looks great. In reality, consumption is growing so fast that spending can't keep up--and that means an increasing squeeze on costs.

For reasons both political and economic, the Chinese government wants to provide higher-quality healthcare that's also more efficient, the Asia Times reports. That means "increasingly aggressive cost saving plans" aimed at controlling expenses. Witness the across-the-board price cuts on some key drugs last year, for instance. We've reported on the "Anhui Model" before, but it bears repeating: That province's centralized tender process, which puts a major damper on prices, has been replicated by more than a dozen other provinces.

But that doesn't mean pharma can't prosper in China. Good thing, since drug companies have been placing big bets on the Chinese market, building R&D and manufacturing facilities worth hundreds of millions, plus hiring hordes of sales reps. A clutch of drugmakers -- AstraZeneca ($AZN), Sanofi ($SNY), Roche ($RHHBY), GlaxoSmithKline ($GSK), Novo Nordisk ($NVO), Johnson & Johnson ($JNJ) and Pfizer ($PFE)--all saw 30%-plus growth in China in early 2011, J.P. Morgan says.

One contributing factor? As Kleiner Perkins managing director James Huang said at OneMedPlace's China Forum in San Francisco, some 60% of China's healthcare stimulus money "ended up going to non-Chinese multinationals." Big Pharma included.

- read the Asia Times piece

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