China, once viewed by the Western world as a nation of copycats with large-scale manufacturing abilities, has now turned out to be the darling of the Western pharmaceutical companies, probably the most preferred destination in the world.

With China becoming a signatory to WTO a few years ago, most of the top 20 global pharmaceutical companies have set up shops in China for sourcing raw materials, manufacturing tie-ups, drug research and development and clinical trials. Several multi-national companies have set up their base in China. Pfizer has invested more than $500 million in China since the 1980s, GlaxoSmithKline has invested about $400 million, AstraZeneca has invested about $140 million, Novartis has invested about $70 million in China, Roche opened an R&D center in Shanghai, which is its first in Asia and fifth worldwide, Eli Lilly and Novo Nordisk also set up R&D facilities in Shanghai and Beijing respectively.

AstraZeneca's plans are to make an additional investment of 300 million yuan (37.5 million U.S. dollars) in the next five years in China. Novartis AG, Glaxo Smith Kline and Sanofi Pasteur are in the process of tapping the booming Chinese vaccines market, growing at a rate of 20 percent in an year and expected to grow as three billion yuan (375 million U.S. dollars) this year.

China's resources for clinical trials, low-cost manufacturing abilities and its 1.3 billion population and technology services are attracting almost all major drug makers from different parts of the world. The China Center for Pharmaceutical International Exchange estimates that sales of the CRO market in China reached 560 million yuan (US$70 million) in 2005, from 480 million yuan (US$60 million) in 2004. In 2006, it is estimated to reach 700 million yuan (US$87.5 million). The market for outsourcing drug development in China is estimated to see an average annual growth rate of about 25 per cent in the coming years, in comparison to the global average growth of about 14 per cent.

China's pharmaceutical industry ranks seventh in the world and is expected to become the world's 5th largest by 2010 with pharmaceutical sales of US$24 billion. Some experts say that China could surpass the US by 2020 to become the world's largest pharmaceutical market.

Total sales of pharmaceuticals in China, excluding traditional Chinese medicine reached an estimated US$ 19.2 billion in 2005. China's State Food and Drug Administration (SFDA), the regulatory body of China approved at least 10,000 generic drugs in 2005 alone.

Hepatitis B and C and HIV/AIDS are still major problems in China. The overall Chinese disease profile is beginning to look more and more like that of the Western world. Cancer (liver, lung, gastric and colorectal) and cerebro-vascular, cardiovascular and respiratory diseases accounted for 77 percent of deaths in 2000. Changing lifestyles should increase the amount of diabetes and obesity in China as it has done in nearby Korea.

Top 10 players in China control about 15 per cent of total industry sales. Multinationals have over 600 active joint ventures in China and most global industry giants have a China presence. Most pharmaceuticals are sold through hospitals, which depend on drug sales for more than 80 per cent of their revenues.

SFDA's GMP policy implementation in July 2004 has led to the restructuring of the pharmaceutical industry in China. More than 1300 non-compliant units were forced to stop selling their products. As of March 2006, an estimated 3,700 GMP certified pharmaceuticals firms were operating in the country.

There are about 1,80,000 pharmacies in China in 2005. Local companies are starting to build chain store networks through acquisition. Beijing Pharmaceutical Co, for instance, now has a network of over 900 outlets, including over 270 in Beijing and at least 600 small stores in rural areas.

China is also in the process of developing an IPR strategy to strengthen China's competitiveness as a global manufacturing powerhouse by reducing the cost of IP in manufactured drugs.

China will remain an attractive location to foreign drug companies, as China offers many advantages in terms of the size of its marketplace, the relatively easy access to patients who are available for clinical trials, and lower clinical trial costs.