China’s Corruption Crackdown Hits Big Pharma

Source: Thinkstock

Source: Thinkstock

China’s corruption crackdown is beginning to affect Big Pharma, and the industry, which has enjoyed easy growth in China for years now, may have to compensate as the country becomes more serious about corruption allegations.

A recent report from Reuters announced that the 60 Chinese healthcare companies included in their survey saw average profit margins decline to around 10 percent last year, from 15 percent in 2012. The source reports that net profits also fell, 2.1 percent in 2013, down from around 20 percent growth in previous years.

Previously, China has been a hotspot for Big Pharma companies. Large drugmakers in particular have been experiencing dwindling growth in both Europe and the United States, and have relied on the emerging markets in China to drive growth.

“Most companies have enjoyed growth for 5-6 years as money was thrown at the healthcare system to improve access,” said Alexander Ng, a Hong Kong-based associate principal at McKinsey & Co. “Now China is more into cost containment mode … and squeeze on pricing and margins is a lot more apparent.”