Sales of pharmaceuticals in China are already the third-highest in the world, and China is likely to become the world’s second-largest drug market within the next year. Multinational pharmaceutical corporations cannot afford to underperform in China if they want to achieve global prominence. But as significant policy and market changes rock the basis of competition, incremental adjustments to the current commercial model will be insufficient to maintain a growth trajectory.
The Chinese government’s commitment to improved healthcare access is creating millions of new pharmaceutical customers. However, the government’s need to contain costs has increased pricing pressure on drugs, which now threatens the profits that multinational producers of “originator” drugs1 have long enjoyed. Merely tweaking the existing commercial model will not be enough to manage the inevitable price decline. Without changing the current business model, Bain & Company analysis shows a doomsday scenario in which the current existing originator model goes “un-economical” within five to seven years.