China remains an attractive target for pharmaceutical research and manufacturing, and major players from around the world are flocking to benefit from cut-price production, according to a recent research report by Shanghai Huaran Investment Consulting Group.

   The report states that China is an attractive option for pharmaceutical outsourcing, as drug development costs approximately 20% less than in the West, and takes less development time. Several multinational players are outsourcing to China and cutting jobs in Western regions, in order to offset financial losses from the impending patent cliff.

   The Chinese boasted the third largest pharmaceutical market in the world in 2011, with an estimated value of approximately US$64 billion, and the country also represents the world's largest exporter of goods. The Chinese pharmaceutical market is currently highly fragmented, but consolidation is increasingly being sought among domestic players. The majority of deals made in the Chinese pharmaceutical industry are mergers and acquisitions, which allow companies to integrate resources and reduce competition, while phasing out independent companies which are unable to keep up.

   However, poor drug quality and flawed intellectual property laws make companies hesitant to invest in Chinese pharmaceutical firms. Although China has tightened its regulations in recent years, stories of poor drug quality continue to slip through the cracks, and intellectual property rights are also threatened. The Chinese government implemented a new licensing law in July 2012 allowing them to issue compulsory licenses to domestic pharmaceutical companies for the manufacture of cheap generic copies of patented drugs, in the case of emergency or public interest. This could dissuade international pharmaceutical companies from investing in drug development, potentially setting back innovative drug research.

   Shanghai Huaran Investment Consulting Group pays close attention to the pharmaceutical Industry and will consistently focuses on the development of the industry.