A Study Of The China Pharmaceutical Industry Value Chain And

Abstract:Global value chain provides us with a integration of macro and micro perspective to analyze industries. By determining the characteristics of the value chain, we try to provide advice to the further development. We aim to clarify the characteristics of China pharmaceutical industry from aspects of value added, drive force, governance mode etc under global value chain framework and verify our conclusion with A-share listed company profitability data.We concluded that the difference between sub-sectors within pharmaceutical industry is huge and can not be summarized with one particular type. The study of pharmaceutical industry value chain must be refined to sub-industries.The chemical pharmaceutical value chain is connected to the global chain most closely among other sub-sectors. Industrial value distribution accord smile curve, raw material drug production is the lowest end of the value chain while the production of its downstream shares slightly higher added value. Chinese pharmaceutical companies insert in global value chain with these two links. Chemical pharmaceutical value chain is producer-driven. According to the different governance model, for special drugs suppliers, process upgrades and product upgrades are the most promising; while for the bulk raw materials suppliers, there is much room for function upgrades.Biopharmaceutical industry chain is a typical producer-driven value chain, biotechnology breakthroughs will drive the industry fast-developing. Global biopharmaceutical value chain is featured with large multinational pharmaceutical companies’high degree of vertical integration. The domestic biopharmaceutical companies is facing relatively independent domestic value chains. But its value chain length is shorter without original research and drug discovery. This sub-sector is currently facing opportunities.Chinese medicine industry is rooted in China and driven by buyers. Brand, the core competencies, not only can effectively enhance the profitability of the business, but also can help companies extending footprints to major health industry category, achieving cross-chain upgrades. In addition, rooted in the huge domestic demand, and demand is expanding constantly, with value chain dominated by the Chinese enterprises, Chinese medicine value chain is a national value chains.By R&D outsourcing trends and the trend of gradual shift to emerging markets, China is facing the opportunity to undertake international research and development transfer. Specifically, contract research organization (CRO) in China is booming, and the profitability of such enterprises is far stronger than ordinary pharmaceutical companies.In response to these conclusions, we conducted the relevant measurement tests and found that chemical pharmaceutical corporate profitability and their respective industry chain downstream is significantly correlated. The closer to the downstream, the stronger profitability. Whether it extends to the R&D links is significantly correlated. The biopharmaceutical company’s research and development costs/revenue data is not significantly correlated to the profitability. We tend to think that currently bio-pharmaceutical industry is still in its embryonic stage, while the bio-pharmaceutical industry R&D cycle is long and currently R&D investment has not yet generate revenue. For Chinese medicine industry chain, brand value is significantly related to profitability.For this conclusion, we offer the industrial development policy recommendations as below. For chemical pharmaceutical companies, we believe the government needs to further support the long-term planning of exporting to Europe. And we believe that for the bio-pharmaceutical industry, strict examination and approval system, standardization of bio-pharmaceutical industry is expected to promote healthy and orderly development. And for traditional Chinese medicine industry, which is currently facing good opportunities for development, more specific conduction is expected in medicine talents training, standardization, intellectual property protection and other issues.