Weak growth in profits highlights four major issues
Recently, the National Development and Reform Commission announced the medical industry operation report and expected that the main factors driving the development of the industry in 2007 remain unchanged. The pharmaceutical end market is still strong, and the development of the pharmaceutical industry will continue to show a good momentum of growth. The industry is also facing major adjustments.
It is initially estimated that the growth rate of total industrial output value and sales revenue in 2007 will remain at around 18%, and the industry economic efficiency level will remain at the level of 10% to 12%.
The report believes that in 2007 the international trade in pharmaceuticals, especially the trade demand for APIs and intermediates, will continue to grow steadily. Domestically, with the introduction of medical reform programs, new rural cooperative medical care is being promoted everywhere, and the huge potential for medical consumption in the rural market is gradually emerging. At the same time, with the acceleration of medical reform, the development of community medical care and the new rural cooperative medical system will change the current market pattern of excessive concentration of medicines in large urban hospitals. The industrial resources will be further concentrated on the dominant enterprises, improve the entry barriers for the industry, and accelerate the adjustment and optimization of the industrial structure, which will have a far-reaching impact on the future development of the industry.
The Development and Reform Commission judged that from the perspective of development trends, the rapid growth of the pharmaceutical industry for more than 20 years has been changing. The level of benefit has declined and it has entered a period of steady growth.
The National Development and Reform Commission also put forward policy recommendations in its report, namely, actively formulating tax incentives, financial support, government procurement, and intellectual property protection policies that are conducive to the innovative development of the pharmaceutical industry.
At the end of the report, it is proposed to establish a national basic medicine system based on deepening research on the reform of the pharmaceutical system.
The report pointed out that last year, the pharmaceutical industry realized a total profit of 41.3 billion yuan, a year-on-year increase of 11.1%, which is at a historically low level. There were 1,368 accumulated loss-making enterprises with an industry loss of 22.62%, and a cumulative loss of 4.463 billion yuan, a year-on-year increase of 27.37%. The drop in profit reflects four major issues. The decline in industry profitability is the main issue facing the industry. The report believes that the main reason for the declining growth rate of the industry is the continuous high cost of the upstream industry; second, the serious shortage of start-ups and rising operating expenses; and third, the overall decline in the price of medicines.
The frequency of drug safety incidents is now listed as the second most important issue, and the intensified competition in the domestic market has become the third largest issue.
The report concludes that the pharmaceutical industry is also facing the problem of increased trade frictions and disputes in the international market. Some companies have adopted the “outside support†strategy. To seize the international market share, some companies have introduced domestic vicious competition to the international market and used China's low production and labor cost advantages have competed to lower the price of a large number of low-priced products into the international market, triggering a series of anti-dumping and anti-monopoly lawsuits.
Recently, the National Development and Reform Commission announced the medical industry operation report and expected that the main factors driving the development of the industry in 2007 remain unchanged. The pharmaceutical end market is still strong, and the development of the pharmaceutical industry will continue to show a good momentum of growth. The industry is also facing major adjustments.
It is initially estimated that the growth rate of total industrial output value and sales revenue in 2007 will remain at around 18%, and the industry economic efficiency level will remain at the level of 10% to 12%.
The report believes that in 2007 the international trade in pharmaceuticals, especially the trade demand for APIs and intermediates, will continue to grow steadily. Domestically, with the introduction of medical reform programs, new rural cooperative medical care is being promoted everywhere, and the huge potential for medical consumption in the rural market is gradually emerging. At the same time, with the acceleration of medical reform, the development of community medical care and the new rural cooperative medical system will change the current market pattern of excessive concentration of medicines in large urban hospitals. The industrial resources will be further concentrated on the dominant enterprises, improve the entry barriers for the industry, and accelerate the adjustment and optimization of the industrial structure, which will have a far-reaching impact on the future development of the industry.
The Development and Reform Commission judged that from the perspective of development trends, the rapid growth of the pharmaceutical industry for more than 20 years has been changing. The level of benefit has declined and it has entered a period of steady growth.
The National Development and Reform Commission also put forward policy recommendations in its report, namely, actively formulating tax incentives, financial support, government procurement, and intellectual property protection policies that are conducive to the innovative development of the pharmaceutical industry.
At the end of the report, it is proposed to establish a national basic medicine system based on deepening research on the reform of the pharmaceutical system.
The report pointed out that last year, the pharmaceutical industry realized a total profit of 41.3 billion yuan, a year-on-year increase of 11.1%, which is at a historically low level. There were 1,368 accumulated loss-making enterprises with an industry loss of 22.62%, and a cumulative loss of 4.463 billion yuan, a year-on-year increase of 27.37%. The drop in profit reflects four major issues. The decline in industry profitability is the main issue facing the industry. The report believes that the main reason for the declining growth rate of the industry is the continuous high cost of the upstream industry; second, the serious shortage of start-ups and rising operating expenses; and third, the overall decline in the price of medicines.
The frequency of drug safety incidents is now listed as the second most important issue, and the intensified competition in the domestic market has become the third largest issue.
The report concludes that the pharmaceutical industry is also facing the problem of increased trade frictions and disputes in the international market. Some companies have adopted the “outside support†strategy. To seize the international market share, some companies have introduced domestic vicious competition to the international market and used China's low production and labor cost advantages have competed to lower the price of a large number of low-priced products into the international market, triggering a series of anti-dumping and anti-monopoly lawsuits.
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