Price curbs, lack of research give foreign firms upper hand

Foreign-invested joint ventures have captured one third of the mainland's drugs market and the proportion is rising, with domestic firms unable to match them in developing and marketing new drugs.

Domestic firms are also handicapped by price controls not applied to foreign firms.

The China Economic Times presented a sombre analysis of the country's pharmaceutical industry and urged reforms to prevent the foreign firms taking an even bigger share of the market.

By the end of last year, the mainland had 6,391 drug companies, including 1,790 joint ventures, with total production of 163 billion yuan (about HK$152.19 billion), up 14 per cent over 1997.

The first joint venture was set up in 1980 and 20 of the world's 25 biggest producers have set up mainland factories.

Intense competition and weak consumer demand are making the business increasingly less attractive. Profits on sales last year averaged only 5.91 per cent and the industry's rate of profits to assets was 5.52 per cent, down from 20.38 per cent in 1991.

The domestic industry is ill-equipped to compete with the global giants. The mainland's biggest manufacturer, Hua Bei Pharmaceutical, had output last year of 3.54 billion yuan, just 2.4 per cent of the sales of United States giant Merck.