Experts Say System Causes Decline in Profit Growth of the Pharmaceutical Industry

Recently, the state announced the economic operation of the pharmaceutical industry in the first half of 2011. From January to June this year, China's pharmaceutical industry achieved an output value of 714.6 billion yuan, a year-on-year increase of 27.9%. Among them, the chemical drug manufacturing industry was 117.8 billion yuan, the chemical pharmaceutical manufacturing industry was 158.3 billion yuan, the Chinese patent pharmaceutical manufacturing industry was 119.2 billion yuan, and the biological and biochemical drug manufacturing industry was 51.9 billion yuan.

According to Guo Fanli, a research fellow in the pharmaceutical industry of China Investment Consulting Group, from January to June this year, the average growth rate of China's pharmaceutical industry was 16.8%, the overall production and sales rate of the pharmaceutical industry was 95.1%, and the pharmaceutical industry realized a total profit of RMB 62.9 billion, a year-on-year increase of 21.2%. The pharmaceutical industry completed a total investment of 110.8 billion yuan in fixed assets, an increase of 39.3% over the same period last year. In terms of imports and exports, the cumulative import and export volume of China's pharmaceutical industry reached US$34.55 billion in January-June, an increase of 39.9% year-on-year, showing rapid growth.

From the above economic indicators, it can be seen that in the first half of this year, China's pharmaceutical industry continued to maintain steady growth, structural adjustment was gradually promoted, and the overall industry continued to show good momentum. However, it should be noted that although the total profit of the domestic pharmaceutical industry in the first half of this year totaled 62.9 billion yuan, up 21.2% year-on-year, compared with the 37% increase in the same period of 2010, the growth rate in the first half of this year fell by 15 percentage points. What are the reasons for this?

Guo Fanli pointed out that, in fact, the decline in profitability of the pharmaceutical industry is mainly due to the current domestic low price bidding system for pharmaceuticals, which has directly led to a sharp drop in profits, which has led to impediments to various medical sub-sectors. Taking the traditional Chinese medicine industry as an example, due to the continuous rise in raw material prices and continuous price cuts in policies, many Chinese medicine production companies have to stop production to resist the rise in raw material prices. The reason for this problem is still institutional issues.

Guo Fanli said that the lack of a well-established drug pricing mechanism and loose regulation are the reasons for these problems. Judging from the current situation, the growth rate of profit growth in the pharmaceutical industry will continue to decline in the second half of the year. To improve the profits of the pharmaceutical industry, relevant companies must do a good job in cost control and ensure the quality of medicines. On the other hand, it is necessary to increase the research and development of new products and implement the policy of going out and strive to meet international standards. This is an important road for the development of domestic pharmaceutical companies.