How important is the life sciences industry to PwC China at the moment?

The life sciences industry holds significant importance for PwC China and the entire PwC network. It has been a key strategic sector, particularly in China, where the industry’s growth rate has outperformed other sectors over the past decade. The market potential is another crucial factor, as healthcare spending as a proportion of GDP in China is currently around 6%, compared to approximately 17% in the U.S. This reflects significant room for further growth. PwC, as a service provider, remains committed to aligning with market trends and is well-prepared to serve the growing life sciences industry in China. With a dynamic team and access to resources from the global network of PwC, including extensive knowledge, expertise, and industry experience from established markets, PwC China is equipped to address the challenges faced by local clients.

What is the impact of the government’s attempt to refresh the regulatory framework by introducing the two-invoice system into the local market?

The introduction of the two-invoice system by the government has a crucial impact on the distribution market in China. Currently, the distribution process is fragmented, and this initiative aims to consolidate the market, reducing costs and limiting price mark-ups. The goal is to enable drugs to move more directly from manufacturers to patients, improving efficiency and transparency. The consolidation favors larger companies with adequate capital, coverage, and channels, while smaller and medium-sized companies may face challenges in sustaining their operations. Despite potential difficulties, the initiative ultimately benefits the industry in the long run by enhancing transparency and exerting control over pricing.

In recent years, China’s life science space has experienced record-breaking activity in terms of IPOs and M&As. What is driving the recent flurry of activity?

The recent surge in IPOs and M&As in China’s life science space can be attributed to the country’s strong pharmaceutical ecosystem that fosters innovation. Hong Kong has been particularly influential in inspiring these activities. The current regulatory framework prioritizes policies that encourage entrepreneurs to establish new businesses utilizing the latest technology, attracting investments and cash inflows. As the majority of players in the market focus on manufacturing common generic drugs, the government has implemented favorable policies to encourage local companies to produce innovative products, leading to increased acquisition activities. Many clients, both domestic and foreign, are targeting such companies for acquisition. While some companies maintain a primary focus on the local market due to the complexities of the global market, they seek cost-effective ways to differentiate themselves from their peers. One approach increasingly seen is licensing products derived from new technology from overseas markets for local use.

Geographically speaking, much of the growth in China’s life sciences industry seems to be emanating from Shanghai. Do you see potential for this success to be replicated in any other key cities?

The growth of China’s life sciences industry is not limited to Shanghai alone. Provincial governments across China are actively prioritizing the life sciences sector. Various regions have established special economic zones, science parks, and medical cities, which significantly contribute to nationwide growth. For instance, Suzhou in Jiangsu province is home to numerous innovative companies that benefit from local policies supporting the industry. Proximity to Shanghai, along with its own robust development, including amenities such as international schools and local tax incentives, attracts individuals and their families. This factor plays a crucial role in attracting talent that drives success in innovative companies.

What is your outlook on the future of China’s pharmaceuticals industry, and what role is PwC China going to play in its future?

The Chinese government has dedicated immense efforts to benefit its people through three key objectives: ensuring the availability of new medical treatments and drugs, improving their accessibility, and emphasizing affordability for better coverage across the country. Given the government’s focus, it comes as no surprise that the pharmaceutical industry holds great importance and responsibility for PwC China, aligning with the government’s priorities. One area that shows significant potential in China is biopharma, which is well-coordinated and advanced, with locally developed technology contributing to the establishment of a robust R&D ecosystem. PwC has been making investments in this field concurrent with the sector’s development. The recent recognition of PwC China as the ‘Best Business Transformation Partner’ in the Pharma industry further validates our efforts. PwC China will continue to play a crucial role in contributing to the growing market, working closely with the government, multinational companies, and other key stakeholders to support the industry’s future growth and success.