Introduction to Foreign Investment in Medicine

In accordance with the Guiding List Concerning Foreign-Funded Industries, jointly published by the former State Development Planning Commission (now the State Development and Reform Commission), the State Trade and Economic Commission and the MOFTEC foreign investors are encouraged to invest in the following fields of medicine.

Production of patent material medicines or material medicines protected by the government and those in need of importation, vitamins (production of nicotinic acid), amino acid production, production of fever-allaying, analgesic medicines by using new techniques and equipment, production of new anti-cancer and cardiovascular medicines, production of new, efficient and economic contraceptives;

Production of new kinds of medicines by using bioengineering techniques, anti-AIDS vaccines, anti-HIV vaccines and contraceptive vaccines, etc, exploitation and production of sea medicine, production of diagnosis agents of AIDS and radiating immune system diseases, pharmaceutics (production of new agents and products involving new techniques, such as slow release, control release, target and skin-penetration), exploitation and application of new medicinal auxiliaries;

Processing and production of Chinese medicines, their extracts and medicaments of Chinese origin (except the traditional parching technique of making small pieces of herbal medicines for decoction), production of biomedical materials and products, production of antibiotic material medicines for animals, exploitation and production of new products and agents of veterinary antibiotics, vermifuges, pesticides and anti-coccus medicines.

Foreign investment is restricted in the following fields of medicine: production of nalectin, penicillin G and so on, production of analginum, paracetamol, vitamins B1 and B2, vitamins C and E, production of State-planned vaccinum, vaccine, immunotoxin, toxoid (such as BCG and vaccine for poliomyelitis, measles, epidemic encephalitis B and epidemic cerebrospinal meningitis, etc), production of addicted anaesthetic and psychiatric drugs (with the Chinese side holding the share), production of blood products, production of disposable hypodemic syringe, the transfusion system, blood transfusion devices and blood containers.

Foreign investment is prohibited in the following fields of medicine: processing traditional Chinese medicine from the list of State-protected resources (licorice roots and gunny grass, etc), application of the processing technique of prepared herbal medicine in small pieces ready for decoction, and the production of half-processed medicine using a secret recipe.

It is well known that medicine in China is an industry that opened up early to foreign capital. One such famous joint venture (JV) is Xian-Janssen Pharmaceutical Ltd. With China's accession to the World Trade Orgainzation, the opening-up level of the country's economy stepped up to a new height, but foreign investment is still urgently needed for industrial concord and upgrades. Meanwhile, foreign investors think highly of the industrial prospects of medicine in China and look forward to increasing investment accordingly. Mergers and acquisitions will likely be the focus of the public.

At present, 20 of the 25 biggest transnational pharmaceutical corporations have set up manufacturing enterprises of sole investment or JVs, and more than 1,800 JVs have been established. The sales of the foreign-invested enterprises has accounted for 25 percent of total annual sales in the medicine industry. The medicine produced has accounted for 60 to 65 percent of annual sales in big city hospitals. The facts indicate that foreign investment has played an important role in China's medicine industry.

Economic development and huge market potential are the factors attracting transnational corporations because their performance in the Chinese market has become a decisive factor for their development in the future. More and more well-known, transnational corporations realize this. International corporation groups, such as Johnson, Bristol£­Myers Squibb, Pfizer and Norvatis are expanding their business affairs in China steadily, and the move to increase input by some transnational corporations needs special attention.

For example, AstraZeneca, one of the leading five corporations of the global medicine industry, has set up a production base in Wuxi, Jiangsu Province -- its biggest investment in Asia (also the biggest ever by transnational corporations in China), which cost US$100 million. The base has a great producing capability and can yield a complete list of pharmaceutical types, including troches, capsules, oral liquid, aerosol and asepsis products. Their products include Losec, which is in the global medicine sale list, and the well-known Betaloc and Bricanyl.

As the biggest pharmaceutical corporation in the world, the headquarters of GlaxoSmithKline attaches great importance to the Chinese market. SmithKline invested US$92 million in registered capital in their Tianjin factory before the merger; the factory in Suzhou tallied an investment cost of US$136 million by the former Glaxo. As one of the pioneering pharmaceutical corporations investing in research, GlaxoSmithKline has worked with Chinese scientific and research groups on several occasions. For example, at the beginning of the 1990s, it cooperated with a Chinese pharmaceutical research institute in the filtration and development process of an approximate 10,000 herbal medicines and it also carried out collaborative projects worth US$7 million. According to statistics after the merger, GlaxoSmithKline has injected more than US$10 million in research and development projects in China.

[Source: Ministry of Health]