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University Counseling helps many clients in the healthcare industry solve many challenges facing the Chinese market. Through our work, we have developed our professional insights into the many intricacies of the past, present and future of the Chinese market. Here, we will examine how China’s growing healthcare market faces the latest in influence.
Despite the poor performance of the world market, China’s OTC market continues to grow. Based on our research, we estimate that the global OTC market will grow by 5% in 2013 and an increase of nearly 16% since 2007, with a value of about 141 billion U.S. dollars.
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IMS Health notes that the OTC market has outperformed the pharmaceutical industry. IMS Health said that by 2015, China’s over-the-counter sales reached 174 billion yuan, currently accounting for only 15% of China’s pharmaceutical market, while over-the-counter sales accounted for 17% of the growth rate of
China’s pharmaceutical market
In contrast, factors such as market growth in emerging countries, growth in new distribution channels, encouragement of self-medication by market participants and the development of strong brands have been the driving force for the development of the pharma’s industry as a whole. This is especially true in the BRIC countries, especially in countries with a large population and a booming middle class.
As the GDP of these countries continues to grow, larger consumer demographics will only increase the profit margin of over-the-counter transactions. Some studies show that this growth rate is the highest in the world, with China and Brazil growing at 20%, Russia and India at 8% and 7% respectively.
While these countries lack some of the more developed market regulations and structured business environments, changes in operational legislation and consumer attitudes toward the concept of OTC are expected to be the backbone of growth.
Multinationals are expected to be more active in forming alliances with local manufacturers that establish distribution channels in these markets to offset the stagnant growth they face in their home markets. In China, the operational framework actually exists between developed and developed markets.
Preference and Pricing of China OTC Medical Market
According to Sohu, a well-known Chinese media company, per capita spending on health care products in China is still low at US $ 28 per person, compared with US $ 1,000 per capita in the United States in 2015. This means there will be considerable room for growth in the Chinese off-market healthcare market because of the steady growth in revenue for Chinese citizens.
However, China’s OTC medical system is quite different from the developed countries. In fact, the Chinese government announced a series of measures to continuously strive to thoroughly reform the country’s medical system.
Due to the implementation of the new medical reform program in China, the government’s control policy on “unreasonable medical expenses” in 2015 started to stabilize the outpatient fees and the rising costs of medicines. Sales of ancillary drugs in China are much higher than in many western countries, and in some Chinese hospitals, sales of ancillary drugs account for 60-70% of total drug sales. In sharp contrast, according to the
“Daily Economic News”, the world average is below 20%. To alleviate the pressure on public health insurance, many provinces, such as Yunnan and Inner Mongolia, have introduced a list of supplementary medicines to regulate their prices and access levels.
“In some Chinese hospitals, sales of ancillary drugs account for 60-70% of total drug sales.”
Compared with consumers from Brazil, Russia, India, the United States, Europe and Japan, Chinese consumers are among the most globally health conscious countries with healthy household items with annual sales of 71 billion U.S. dollars.
According to a survey by the Boston Consulting Group, 73% of Chinese people are willing to trade and pay premiums for what they consider to be healthier. Apart from this, it is very important for the Chinese people to want happiness, look good and have sufficient energy and a positive lifestyle. To achieve this goal, it is important to maintain good health and physical and mental health.
Income growth in the upper strata has driven the consumption of vitamins and supplements in China. As government policies control the use of OTC in hospitals and OTC demand continues to rise, retail pharmacies will be the main channel for the OTC market.
Due to common lifestyle factors, such as occupational stress, family responsibilities, long working hours, etc., often cause insomnia, fatigue, lack of concentration, obesity, illness and other symptoms. The incidence of these complaints grew especially rapidly among younger generations
The University recently reported that 30% of those 18-24 years old have these lifestyle diseases, compared to only 18% of people over the age of 40. With this in mind, Chinese consumers are not only seeking treatment but looking for precautionary measures. As a result, they have taken exercise, diet, VMS and OTC products as a complete health solution.
BCG findings on Chinese consumer health and health preferences. Source: University Counseling Company reproduced BCG research data. In October 2016, the Chinese government promulgated the “Outline for Healthy China 2030 Plan”,
pointing out that the healthcare industry will be worth 800 billion yuan by 2020 and more than 1.6 trillion yuan by 2030. Chinese consumers prefer Chinese medicine to Western medicine.
These Chinese medicines are very popular in all age groups in China. In addition, even among well-educated consumers, the use of Chinese medicine is still very common and well aware of the side effects of Western OTC products. In other words, well-educated Chinese consumers believe that western medicine products more effective than traditional Chinese medicine, more convenient. Chinese consumers generally prefer products that offer more versatility and functionality because they find it more convenient and more affordable.
Ingredients or vitamins added to certain medications are considered artificial and unhealthy; Chinese consumers often think that healthy foods should be fresh, natural, and organic. According to the Boston Consulting Group (2014), more than half of respondents expressed concern that health foods are not advertised.
This lack of knowledge and tight regulation, combined with aggressive marketing techniques, often drives distrust among Chinese consumers.
The competitive environment in China’s healthcare market is certainly complicated, but with the advent of large multinationals and competition with domestic brands, retail prices have been declining and stabilizing in China’s off-market healthcare market since 2005.
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