The Tenth Five-Year Plan of the Medicine Industry and its Development

1. The Tenth Five-Year Plan of the medicine industry
The situation and market environment:

1) The international market
The annual growth rate is expected to be 8 percent annually in the next five years and the market volume will increase to US$540 billion by 2005.

2) The domestic market
The domestic market will not only be influenced by the international market but also by the following factors:

(a) With improving living standards, the medicine market growth rate will exceed that of the international market.
(b) Urban employee reform basic medical insurance will be carried out during the Tenth Five-Year Plan, which will stimulate medicine consumption and the development of the medicine industry.
(c) The urban population will increase by 10 million annually during the Tenth Five-Year Plan, which will increase the demand for medicine.
(d) The nation's population will reach 1.33 billion by 2005, and its net increase will bring a new demand for medicine.
(e) Since many Chinese people are entering their golden years, medicine consumption by the elderly will increase significantly during the Tenth Five-Year Plan.
(f) The retail market will expand continuously and its' annual growth rate is expected to hit 15 percent during the Tenth Five-Year Plan.
(g) During the Tenth Five-Year Plan, rural demand will become the main source of the increase in the medicine industry.

Considering the factors above and the development rate since the Ninth Five-Year Plan, the growth rate of our nation's medicine market will be about 12 percent higher than that of the global market.

3) The impact of China's accession to the WTO on the medicine industry

From a long-term point of view, China's accession to the World Trade Organization will help improve industry performance and international competitiveness. From a short-term viewpoint, the accession will directly influence the following three aspects: a decline in tariffs; protection of intellectual properties; the opening-up of wholesale and retail medical services.

4) Guidelines and main objectives of development and structural readjustments

a. Guidelines
To promote the development of the medicine industry and improve its overall strength and international competitiveness by reconstructing traditional medicine industries, accelerating the industrialization process of advanced technologies and realizing a better industrial structure of the medicine industry.

b. Main objectives
The overall objective for the medicine industry by 2005 is to establish a foundation for the transition from a nation with a high output to one with a high-quality medicinal output. The specific targets of the annual growth rates are as follows: 12 percent for total production value; 13 percent for net increase; 9 percent for total sales; 6 percent for the sum of exports and imports; 13 percent for profits.

Ten new medicines will achieve industrialization, some of which will get internationally registered and enter the international market. About 50 medicines with certain innovations will reach the pre-clinical research.

Two to three patent Chinese traditional medicines will attempt to enter the international market, and their exports will account for a bigger part of the total Chinese drug exports.

Chemical medicines will increase their market share abroad and exports earnings of five kinds of medicines will exceed US$100 million each.

To develop a number of new products with indpendent Chinese intellectual properties rights, the level of physical-imaging facilities should meet that of the end of the 1990s; product structure should adapt to the transformation of medical care objectives and their pattern; medical equipment exports should realize an annual growth rate of 10 percent, and part of them will enter a mass-exports phase.

Large-scale enterprises should set up their technological development centers. The cost of research should account for more than 5 percent of their sales income, and their medium and small-sized counterparts should also undergo relatively high increases.

There should be breakthroughs in biological medicine technologies and genomic medicine should enter the industrialization process.

Based on the existing large-scale enterprises, about 10 large enterprise groups will be brought up whose annual sales will account for more than 30 percent of the total; their main products will have a competitive edge over transnational corporations.

To develop 5 to 10 super-scale medicine circulation corporation groups to realize annual sales over 5 billion yuan; to set up around 40 large-scale regional circulation groups to realize annual sales above 2 billion yuan. All above-mentioned enterprise groups will account for 70 percent of total medicine industry sales. To help 10 retailing enterprises become well established in the domestic market and abroad, each will have more than 1,000 branches and set up a number of regional retailing chains, each with about 100 branches.

5) Focus and main tasks of restructuring
Focus:
a. To develop modern biological technologies;
b. To promote modernization of Chinese traditional medicine;
c. To develop medicines that can take advantage of China's resources;

Main tasks of restructuring during the Tenth Five-Year Plan:
a. To put special efforts into technological advancements and upgrade the industrial structure.
b. To deepen enterprise reforms and adjust and improve the structure of ownership in the medicine industry.
c. To develop a special medical economy and promote a harmonious development of the regional medicine industry.
d. To find new markets abroad.
e. To maintain a sustainable strategy.
f. To enthusiastically promote the industry's information process.

6). Policies and measures concerned

To realize the settled objectives of Tenth Five-Year Plan, policy support and useful measures are needed.

a.To encourage innovations.
b. To discourage repeat constructions and abandon out-of-date products, techniques and equipment.
a) To reinforce macro-regulations and prohibit low-standard repeat constructions.
b) To encourage enterprises to carry out the consigning processing and further simplify relevant approval procedures.
c) The examination and approval of "mimic" medicine should take market demand, supply and technological standards into consideration, and should be helpful in the structural adjustments of the medical economy. To intensify administration and supervison on the hospital pharmaceutical work.
d) To publish the results of cleared up and revoked products according to the Medicine Regulation Law to produce a convenient situation for capable enterprises to arrange their production and marketing to satisfy demand.
e) To integrate economic, legal and essential administrative means to shut down enterprises that produce or sell illegal or unapproved medicines, pollution, have no chance of making a profit, or ones that do not satisfy the general manufacturing practice (GMP) to create a favorable market system and environment.

7). To create an impartial market environment

a. To clear up and amend files and regulations not favorable to industrial development, and create an impartial environment for enterprise development.
b. To put GMP into practice using appropriate steps and plans. GMP is the guideline for implementing comprehensive quality management in the manufacturing industry. Policy support, such as interest allowance and tax exemption over a certain period for technological improvements of GMP, should be embodied by related policies.
c. To keep up with medicinal circulation system reforms and to amend existing policies and regulations that restrict enterprise reform and development. To promote GSP (good supplying practices) enthusiastically and crack down on the production and sale of illegal medicines.
d. To reinforce the regulation of importing medicine and carrying out GMP over imports.
e. To set up and improve the medical insurance system in a complete, commercialized manner.

2. The development of the medicine industry

A relatively self-contained industrial system and circulation network have come into being, and China has become one of the main medicine-manufacturing nations of the world. There are 3,613 enterprises producing almost 1,500 kinds of chemical medicines with a total production of 430,000 tons, ranking second in the world.

Chinese enterprises are capable of producing 34 types of chemical pharmaceuticals in about 4,000 varieties. In 2000, the output of troche, liquid and powder acupuncture therapy capsules and transfusions reached 277.8 billion, 26.4 billion, 9.3 billion, 48.6 billion and 2.3 billion units.

Chinese traditional medicine has achieved scientific and standard production with the capability to produce some 40 varieties of modern pharmaceuticals, including injections, and production has reached 370,000 tons, with an approximate 8,000 varieties.

From 1978 to 2000, the annual growth rate of the medicine industry was 16.6 percent, becoming one of the fastest-growing industries of the national economy. The production value in 2000 was 233.2 billion yuan, with an annual growth rate of 17.5 percent -- exceeding the the 15-percent target of the Tenthth Five-Year Plan. The industrial net increase was 57.8 billion yuan with an annual growth rate of 15.5 percent. The commercial sale of medicine totaled 150.9 billion yuan -- up 70.5 billion yuan at an annual growth rate of 13.4 percent.

The sum of exports and imports was US$6.4 billion, including US$3.8 billion in exports, up US$0.8 billion over 1995 at a growth rate of 4.8 percent; an externally oriented medicine economy has also come into being gradually. The total tax collected in the medicine industry was 27 billion yuan, up 15.5 billion yuan over 1995 at an average annual growth rate of 18.6 percent; total profits were 14.38 billion yuan, up 9.43 billion yuan over 1995 at an average annual growth rate of 24.5 percent. Both figures exceed the 18-percent target of the Ninth Five-Year Plan. The commerce of medicine realized a profit of 0.76 billion yuan, up 0.4 billion yuan over 1995 at an average annual growth rate of 16.1 yuan. The whole industry entered a phase where the growth of benefits surpassed that of the gross increase and the trend of increases also began to transform.

In 1999, total profits in the medicine industry ranked seventh among the 37 national industries. As a fast-growing industry of the nation's economy, the medicine industry's status will improve further.
In 2002, total assets in the medicine industry amounted to 361.456 billion yuan, up 12.67 percent over the previous year. Sales revenue totaled 222.053 billion yuan, up 16.27 percent over the previous year. Profit reached 20.106 billion, up 163.27 percent over the previous year. Employed workers numbered 1.0418 million, up 1.58 percent over the previous year.

During January-May, 2003, total assets in the medicine industry amounted to 392.718 billion yuan, up 15.47 percent over the same period in 2002. Sales revenue totaled 106.646 billion yuan, up 22.03 percent over the same period of the previous year. Profits reached 10.05 billion yuan, up 70.74 percent over the same period of the previous year. Employed workers totaled 1.1131 million, up 3.83 percent over the same period of the previous year.