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The Chinese vaccine market competition is now transferring from the former price-competition model to a technology- competition model.
The global vaccine market has grown phenomenally over the past decade and is expected to exceed $10 billion in 2007. With the world's largest population and 17 million newborn babies each year, China is the world's fourth largest vaccine market. In China, vaccines represent a market worth over 3 billion RMB ($388 million), and this market is growing at 15% annually, reports Dr. Jianyuan Liu, associate director of National Vaccine and Serum Institute (NVSI) in the study, Advances in Biopharmaceutical Technologyin China.1 Today, China has the largest vaccine manufacturing capabilities and capacity in the world. Dr. Liu and his colleagues also predict that China's vaccine market demand will rise to 20% in the next few years. Recent improvements in China's regulatory, market, and technology scenario are creating an optimistic outlook for its vaccine industry.
Eliza Yibing Zhou
In China vaccines are classified into two categories: government "planned immunization" vaccines and "nonplanned immunization" or "charged" vaccines (Table 1). The first category of vaccines is subsidized and ordered by the government, and eventually supplied to Chinese citizens (mostly children) at no charge. The second category is for-profit with high margins of 30–40% for imported vaccines and more than 50% for domestic vaccines.1 These are "charged for," or "nonplan-ned"vaccines, produced by manufacturers based on the market demand. The charged vaccines may be purchased by consumers voluntarily. The market for the first category of vaccines is controlled by the government and the second is open to domestic or international companies. These two markets are predicted to grow to roughly equal market shares ultimately.2
China's population reached 1.3 billion in 2005 and will approach 1.4 billion in the next decade. The state has managed to control its birth rate to between 1.2% and 1.3%. Each year, approximately 17 million Chinese babies are born and all are suppose to receive vaccination. Based on this number, the following vaccine doses are needed each year for newborn babies:1
With the progress in public healthcare policy, hygiene education, and increased vaccine advertising programs operated by the government, an increasing number of Chinese are realizing the importance of preventive medicines. More Chinese are voluntarily spending on preventative vaccinations to reduce potential threats from prevalent diseases such as hepatitis B and influenza.
Table 1. Vaccine classification in China
The outbreak of SARS, avian flu, and the spread of hepatitis B across China have been directly responsible for energizing the vaccine industry in China. In addition, polio, which was almost eliminated, has reappeared in the country. The prevalence of measles is also increasing. China has set aggressive goals to eliminate diseases such as poliomyelitis in the country by 2012, and measles by 2010. Consequently, polio and measles vaccines are legally allowed a 20–60% price increase by the authorities. Moreover, new generations of traditional planned immunization vaccines may be reclassified as "charged" vaccines. This will permit manufacturers to raise their prices as much as ten times. These developments are fueling the expansion of the Chinese vaccine industry.
Table 2. Vaccine manufacturers in China
The Chinese government has considerably increased its investment in epidemic prevention systems after the SARS outbreak of 2003. The state invested 5 billion RMB ($646 million) on anti-epidemic system in 2005, equivalent to the total investment for the previous five years. The year 2005 was a turning point in China's vaccine development industry. In March of that year, the State Council issued "Administrative Regulations on Vaccine Distribution and Inoculation," which became effective on June 1, 2005. For the first time in history, the regulations dismantled the long-term market monopoly controlled by the provincial disease control centers. Sales outlets increased significantly from the former 54 provincial centers to 5,700 county-level anti-epidemic stations. Qualified drug wholesalers were also permitted to distribute "charged" vaccines. This has removed the supply-demand bottleneck, thereby giving a boost to the Chinese vaccine industry.
Table 3. Major vaccine products in the Chinese market
In the same year, the National Development and Reform Commission (NDRC) published its China Bioindustry Development Strategies, which states: "to develop new types of vaccines to protect national public hygiene safety is the number one project in the biopharmaceutical industry." The government will grant tax privileges to vaccine developers and manufacturers. NDRC is also planning to set up and subsidize special high-tech projects for vaccine development. As a result, the vaccine industry in China is poised to become the most promising high-tech industry in China's biotech sector.
China is home to more than 30 vaccine manufacturers, which produce more than 1 billion dose units of vaccines each year, including 41 kinds of vaccines against 26 viruses. According to China's State Food and Drug Administration (SFDA) product database, there are more than 300 domestic and 130 imported vaccine products of various doses, forms, or specifications in the Chinese market. Although domestic companies have been protected by government policies and have thus dominated the planned immunization vaccines, imported products are becoming increasingly competitive in the charged vaccine market. For instance, all the influenza vaccines purchased by the Chinese Disease Control Center (CDC) in 2005 were imported products.2
The largest Chinese vaccine developer and manufacturer is the China National Biotec Group (CNBG), which controls six former state-owned biological product institutes in Beijing, Shanghai, Changchun, Lanzhou, Chengdu and Wuhan, and two biopharmaceutical companies in Beijing and Chengdu. CNBG employs nearly 10,000 people across China. The six institutes affiliated to CNBG currently supply 90% of planned immunization vaccines to the Chinese market, with an annual output of 300 million doses of vaccines.
Table 4. Pipeline Products1
Privately-owned companies such as Shenzhen Kangtai, Beijing Sinovac, Changchun Changsheng, and Zhejiang Tianyuan have been actively involved in charged vaccine manufacturing since the early 1990s. These companies are becoming very competitive because of their flexible capital advantages and market awareness. Sinovac, for example, has taken the lead in developing vaccines for SARS and avian flu.
Because the Chinese government restricts foreign companies to set up vaccine manufacturing facilities or even seek Chinese contract manufacturing partners, so far, only two foreign vaccine manufacturers, Sanofi Pasteur and GlaxoSmithKline, have established repacking facilities in China. Other major vaccine importers include Merck and Chiron (Novartis Vaccine). Also, Pfizer is planning to enter the Chinese vaccine market after acquiring PowderMed in 2006.
Table 2 and Table 3 summarize vaccine manufacturers and products in China. Table 4 lists the major pipeline products.2
In the current Chinese market, domestic products completely control the planned immunization vaccine market. Foreign companies are only permitted to be involved in the charged vaccine market. This has restricted the imported products market, which accounts for only 10% of the business. In terms of single product share, hepatitis B, hepatitis A, rabies, and influenza vaccines have the chunk of the market share in China. China's current vaccine market size is RMB 3 billion ($388 million) and is expected to reach RMB 10–15 billion ($1.3 billion–1.9 billion) by 2010, based on market growth trends.1 The market perspective is very promising.
Chinese domestic vaccine manufacturers are now facing challenges as a growing number of imported products are entering the market. Domestic vaccines have dominated the Chinese market for decades, thanks to government protection and lower prices. However, the vaccine market competition is now transferring from the former price-competition model to a technology-competition model. The question posed in China today is how competitive are its domestic vaccine manufacturers compared with the multinational giants.
"Which other country (than China) in the world would be able to satisfy the needs of vaccines for 1.3 billion people?" asked Dr. Weidong Yin, CEO of Sinovac Biotech. "Only we Chinese people can help ourselves. We will master core technologies and protect national security and public health...to prevent public crisis such as pandemic influenza, the key is to develop Chinese-owned vaccine products." As a young biotech player, Sinovac has impressed the industry by its achievements in developing China's first hepatitis A vaccine, the world's second combined hepatitis A and B vaccine, and the world's first SARS vaccine.
Given the demographics, healthcare policy, and national needs, we believe there is a promising future for the Chinese vaccine industry.
Eliza Yibing Zhou is project director for research programs on China and India, BioPlan Associates, 307.921.9074, firstname.lastname@example.org
1. Liu JY, Wang N. Vaccines in China. Advances in Biopharmaceutical Technology in China. BioPlan Associates, Inc. and Society for Industrial Microbiology. 2006; 9:22.
2. Wang J. Small vaccines contain big market (in Chinese). Guide of China Medicine. 2005;12:98-99.