Business / Companies

Actavis to exit nation's generic drug market

By Wang Hongyi in Shanghai (China Daily) Updated: 2014-01-18 08:00

Although the lucrative generic drug business is growing fast in China, it's a hard market for global pharmaceutical companies, as shown by the decision of the world's third-largest generic drug producer Actavis Plc to leave China.

The company's Chief Executive Officer Paul Bisaro said Actavis will quit the massive market because of the "difficult" business climate, Bloomberg News reported. The company has sold one operation in China and is in talks to sell another, Bisaro said.

Ireland-based Actavis markets more than 750 products globally and operates in more than 60 countries. Its China manufacturing base is in Foshan, Guangdong province.

A company employee who declined to be identified told China Daily on Friday that the staff members haven't yet received any notice of the closure.

Industry insiders said Actavis' exit reflects its poor business performance in China, where sales have been weak.

"The thin profit margin in the generic drug business is hard for multinational drug companies to accept, especially given the system of centralized procurement bidding in China," said Huang Donglin, chief consultant in the China pharmaceutical industry sector at Frost & Sullivan, a US-based consulting firm.

In China, many medications used in State-run, nonprofit healthcare institutions are based on official lists in each province. The drugs are purchased by provincial governments through centralized procurement bidding, with only the lowest bids accepted, and distributed to health institutions at all levels.

Since 2012, a wave of expiring drug patents has given China's generic drug market, which is dominated by domestic producers, a rare opportunity. The market has been forecast to reach 500 billion yuan ($82.6 billion) by 2015.

Goran Kapicic, managing director at Actavis China, told Chinese media in 2012 that the company's costs for production and quality control were much higher than that of Chinese domestic companies, so it was hard to accept the low procurement prices.

"It's been rare to see large international generic drug companies attain commercial success in China because of their poor adaptation to local conditions," Huang said.

"The market environment in China is very different from the United States, Europe and Japan," Huang added.

In 2012, US-based pharmaceutical giant Pfizer Inc and Zhejiang Hisun Pharmaceutical Co Ltd formed a joint venture to develop, manufacture and commercialize off-patent drugs in China and global markets.

The move was seen as an effective way to compete in the branded generics arena, according to Liu Zhongtang, a researcher at Anbound, a domestic consulting body.

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