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Abstract

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

Management researchers have traditionally emphasized two main factors in the definition of corporate strategies: internal capabilities and industry competition. However, in less stable, transition economies it is particularly the changing institutional environment that influences strategy definition and performance of multinational corporations (MNCs) as shown by numerous international business (IB) scholars. Yet, how institutions matter remains a largely unresolved question. This article examines how institutions have affected the value chain configuration of Western pharmaceutical firms in China. Our research framework identifies four major strategic shifts along the value chain of Western firms in the pharmaceutical industry: upgrading along the value chain, outsourcing to contract service providers, expansion of geographical scope and diversification of product portfolio. The findings allow concrete managerial implications to be derived for decision makers of Western pharmaceutical firms operating in China. © 2013 Wiley Periodicals, Inc.


Introduction

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

The adoption of market-oriented reforms in 1978 marked the beginning of a transition process in China: from a centrally planned to a market economy. Although China has taken a more incremental path toward a market economy than other European and Latin American emerging markets (Hitt, Ahlstrom, Dacin, Levitas, & Svobodina, 2004; Meessen & Bloom, 2007), its path has been accompanied by fundamental transitions in the institutional framework. Academia labels such countries as transition economies (Peng, 2003). From a managerial perspective, it becomes imperative to understand how China's ongoing transition process affects not only a firm's daily operations, but especially its strategic positioning along the local value chain.

In this regard, this article addresses a twofold interest: at the academic level it addresses institutional theory; at the management level it addresses strategy formulation in China's pharmaceutical industry. The resulting research question hence is: How do Western multinational pharma corporations reconfigure their presence along the value chain in China in light of the country's institutional transition?

This article is structured as follows: The next section introduces the emerging pharmaceutical (pharma) market China. Thereafter, the theoretical background, which comprises the research framework, is delineated. Subsequently, the research methodology is briefly explained and finally the findings of the analysis are discussed. The findings are presented in separate sections; each section addresses one shift in the value chain configuration of Western pharma corporations (herein referred to as Western pharmas) during the past decade and examines the institutional drivers underlying the respective shift. The concluding section summarizes these shifts, derives managerial implications, and highlights contributions as well as avenues for further research.

Pharmerging China

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

The Chinese pharma market became the world's third largest in 2010 (IMS Health, 2010b), and is expected to grow further with estimated compound annual growth rates (CAGRs) of up to 21.8% until 2013 (IMS Health, 2009).1 Given this rapid growth, China is termed a pharmerging market along with 16 other emerging countries (IMS Health, 2010c).

China's pharma industry is, however, largely fragmented and although the majority of top 10 pharma companies (in terms of market share in China) are Western players, foreign participation, in general, continues to be limited. The market is currently dominated by more than 3,700 domestic firms accounting for about 75% of annual sales (IMS Health, 2009), of which approximately 95% operate in the (low-value) generics market (Floether, 2009). This highlights the need for strategic adaptations of Western pharmas' conventional high-margin and high research and development (R&D) investment-based business model to exploit the Chinese market to its full potential.

Hospital-Based Health Care System

Several aspects of the health care environment pinpoint the unique complexity that Western pharmas face in China. In general, the health care system is predominantly hospital based. Because hospital sales account for 70% to 80% of the market, only a small remainder is sold in retail pharmacies (Morgan Stanley, 2009). Pharma corporations have to sell their products to these two sources through a fragmented set of more than 7,000 national and provincial wholesalers.

Three-Scheme Health Care Insurance

The government has started to implement a comprehensive, three-scheme health care insurance system during the last years: the Urban Employee Basic Medical Insurance Scheme (UEBMI), which had run since 1998, has been complemented by the Urban Resident Basic Medical Insurance Scheme (URBMI) in 2007; the New Rural Cooperative Medical Insurance Scheme (NRCMS) has been launched in 2003 (Wang, 2009). These reforms are related to a general overhaul of China's health care system, the “Healthy China 2020” (Business Monitor International [BMI], 2010a, p. 28) plan, which was announced in 2009.

Drug Pricing and Reimbursement System

Drug pricing and reimbursement are regulated (and monitored) by governmental agencies via a comparably restrictive hybrid pricing model. On the one hand, maximum retail prices are defined within the National Reimbursement Drug List (NRDL), which constitutes the reimbursement framework for the UEBMI and the URBMI. On the other hand, price and quantity of drugs that will be stocked in hospitals are negotiated at the provincial level via a tendering system (BMI, 2010a; IMS Health, 2009). This complex federalist tendering system further challenges vendors by lowering wholesale prices.

Theoretical Framework

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

The theoretical perspective consists of two major elements: institutional theory and value chain analysis. Both elements are briefly discussed and then integrated to compile the article's research framework: the value chain-institution matrix.

The First Dimension: Institutional Theory

Institutional theory is routed in different sciences, predominantly in economics and in sociology. While sociologists focus on the legitimacy-building role of institutions that arises out of cultural and political systems (e.g., Scott, 1987; Zucker, 1987), economists such as North (1990) argue “that the institutional framework serves as constraints to regulate economic activities by providing the rules of the game” (p. 3).

The importance for firms (or organizations in general) arises from the fact that “institutions directly determine what arrows a firm has in its quiver as it struggles to formulate and implement strategy” (Ingram & Silverman, 2002, p. 20). As such, they support and constrain an organization's scope of action. Peng (2006) identifies institutional conditions as the third leg of the strategy tripod that determines corporate strategies, being as important as industry conditions and firm-specific capabilities. A strong and stable institutional framework facilitates business exchanges, since it reduces uncertainty and transaction costs, and helps to define property rights (Djankov, Glaeser, La Porta, Lopez-de-Silanes, & Shleifer, 2003; North, 1990). In this context, institutional theory's relevance becomes apparent: China's dynamic transition toward a rather market-orientated system leads to (dis)continuous changes and instability in the institutional framework (e.g., Peng, 2005). Such institutional transitions can be described as “fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect organizations as players” (Peng, 2003, p. 275).

To analyze the framework in which firms are embedded, the article draws on a concept of Khanna, Palepu, and Sinha (2005) that distinguishes five macro-level and market-oriented institutions: (1) political and social systems, (2) openness, (3) product markets, (4) labor markets, and (5) capital markets. The authors reason that in order to conduct business, companies require inputs from the product, capital, and labor market and sell their outputs in the products or services market. These factor markets are embedded into the macro-level setting, consisting of the political and social environment as well as the country's (economic) openness. Since change in these macro-level contexts may happen at different speeds in transition economies (Meyer & Peng, 2005), the political and the social system will be split for the purpose of this analysis.

The Second Dimension: Value Chain Concept

Porter (1985) introduces the value chain as a concept to examine firms' operations. In order to diagnose a company's sources of competitive advantage, it “disintegrates a firm into its strategically relevant activities” (p. 33). The concept can be used to investigate the scope of a single firm or a range of firms within an industry (i.e., their product and buyer segments, geographic reach, or level of vertical integration) (Gereffi, Humphrey, & Sturgeon, 2005; Porter, 1985).

The conventional model requires specific modifications to fit the pharmaceutical value chain and the particularities of the Chinese pharma market. The created value chain comprises of two models provided by IBM Business Consulting Services (2004) and PricewaterhouseCoopers (PwC; 2009a) and entails five primary functions: research/discovery, development, manufacturing, distribution, and sales and marketing (cf. Figure 1).

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Figure 1. The Pharmaceutical Value Chain

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The model clearly emphasizes the contribution of R&D activities for the pharmaceutical industry. Given the differing requirements of laboratory drug discovery and initial preclinical in vitro testing as opposed to (large-scale) in vivo clinical development, the functions research/discovery and development are separated. In the manufacturing stage, the production of the standard active pharmaceutical ingredient (API) is distinguished from the finished dosage manufacturing in order to enable a more detailed analysis. The distribution function assesses companies' geographical product reach across China and is differentiated into tiers that corporations use to categorize Chinese cities. Although no standard classification exists among corporations, tier 1 usually comprises metropolises such as Beijing or Shanghai, and lower tiers refer to smaller cities (Le Deu, Parekh, & Süssmuth-Dyckerhoff, 2008). The last element of the value chain, sales and marketing, differentiates between Western and traditional Chinese medicine (TCM). In China, TCM continues to form a fairly distinct medical concept compared to Western medicine. While Western medicine follows a strongly evidence-focused, scientific medical paradigm, TCM follows a holistic and philosophic approach (e.g., the correct balance between yin and yang), mostly utilizes herbal-based products and is well known for methods such as acupuncture or massages (Wang, Keh, & Bolton, 2010). The international categorization of pharmaceuticals enables both Western medicine and TCM to distinguish between (patented or generic) prescription (Rx) and over-the-counter (OTC) drugs.

Research Framework: The Value Chain-Institution Matrix

The research framework integrates the introduced pharmaceutical value chain and Khanna et al.'s (2005) institutional categorization as depicted in Figure 2. The value chaininstitution matrix, which has been developed for the purpose of this study, allows for both mapping of reconfigurations in the value chain as well as analyzing these changes in China's institutional context.

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Figure 2. The Value Chain-Institution Matrix (institutional perspective adapted from Khanna et al., 2005)

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While the pharmaceutical value chain serves to investigate (shifts in) the strategic presence of Western multinational pharma corporations, the institutional categories are applied to frame the institutional influences underlying these value chain shifts.

Methodology

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

The examination is based on the group level of Western pharma corporations operating in China and focuses on those firms with an annual turnover exceeding US$10 billion, such as AstraZeneca, Bayer Healthcare, or Pfizer (PwC, 2008). The data collection is based on a multimethod design including both desk research and fieldwork. Desk research involved the analysis of industry intelligence reports (BMI and IMS Health), publications by trade and industry associations, industry magazines as well as corporate news and reports. Fieldwork centered on three semistructured expert interviews. Participants were selected according to their industry expertise and worked in the pharmaceutical industry or related consulting practices. Two of the interviewees hold managerial positions in pharmaceutical companies in Germany and China, and one interviewee is a partner in the chemicals and pharma advisory and a member of the China expert group of a leading consulting company.

The broad range of data sources employed allows for cross-validation of the evidence found and higher reliability of the findings—in line with the idea of data triangulation, which Denzin (1978) defines as “the combination of methodologies in the study of the same phenomenon” (p. 291). The conducted interviews served to validate and to further explore shifts and observations made during desk research. The data were evaluated in an iterated process of data collection and analysis (Eisenhardt, 1999). This intertwining allowed for readjustments of the findings' interpretation as new information arose. Here, the framework provided substantial guidance for data categorization. In sum, these measures helped to augment the validity and reliability of the analysis.

Findings

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

The analysis identified four major strategic shifts along the pharmaceutical value chain: upgrading along the value chain (S1), outsourcing to contract service providers (S2), expansion of geographic scope (S3), and diversification of product portfolio (S4) (cf. Figure 3). Each shift and its underlying institutional drivers are first discussed separately and then summarized at the end of this chapter.

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Figure 3. Western Pharmas' Changing Value Chain Configuration in China

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Shift 1: Upgrading Along the Value Chain

Since the early 2000s, Western pharmas have increasingly redirected their investment focus from the construction of manufacturing sites toward the establishment of R&D facilities (IMS Health, 2009; PwC, 2008). This applies to the various segments of the drug discovery and development process.

In 2004, Roche was among the first companies to open a wholly foreign-owned research center, which focuses on early-stage chemistry innovation in China (Roche, 2004). Novartis's intention to invest US$1 billion into the expansion of its integrated laboratory (R&D of chemical and biological drugs) suggests that Western pharmas continue to scale up these investments. The research focus of such centers is of particular interest. AstraZeneca and Novartis, among others, stated their intention of concentrating research on diseases highly prevalent in China such as gastric cancer (AstraZeneca, 2002; Novartis, 2009). This trend might mark “a shift from the industry's history of designing medicines for patients in the West” (Wang & Rockoff, 2010). In order to understand China's specific epidemiological profile, research is often conducted in partnerships with academic or governmental institutions.

This shift is paralleled in the development segment as affirmed by the number of clinical trials registered in China. While only four trials were registered in 2001, the number rose to 497 in 2010, of which an increasing percentage is early-stage Phase I or II trials. Even though this accounts for only 2.9% of globally registered trials, the trials conducted in China significantly outnumber those conducted in other BRIC countries (e.g., 308 trials in India in 2010).2

Reinforced Regulatory Framework and Government Incentives

The definition of a property rights–based legal framework is among the most critical tasks for economies in transition (Puffer, McCarthy, & Boisot, 2010) and is of particular relevance for the pharmaceutical industry. The patent law in China, first enacted in 1984, has been revised twice during the past decade and now formally provides the intellectual property (IP) protection according to World Trade Organization (WTO) standards (BMI, 2010a; Green, 2010). Although the reinforcement of the regulatory framework has helped to alleviate uncertainty among MNCs, the actual enforcement of IP rights (IPRs) remains a key concern (Bate & Porter, 2009). The political commitment to enforce IPRs will, therefore, determine at which pace China will transform from a “conventional product-intensive pharmaceutical industry to an industry capable of significant research and development” (China Association of Enterprises with Foreign Investment R&D-Based Pharmaceutical Association Committee, 2008, p. 40).

As part of China's strategy to become an “innovation-oriented country” (Zhang, 2006, para. 10) by 2020, the government incentivizes the establishment of R&D centers and actively invests in high-quality infrastructure and biotech parks such as Shanghai's Zhangjiang Hi-Tech Park (PwC, 2009b). Since the last amendment of China's Enterprise Income Tax Law in 2008, high and new technology enterprises (HNTEs)3 benefit from favorable tax regulations such as a reduced corporate income tax rate of 15% instead of 25% (Ernst & Young, 2008).

Finally, a critical regulatory issue for Western pharmas is the requirement to conduct clinical trials in China prior to their product launches—notwithstanding former trials in the home market. Together with the clinical trial approval process (9 to 12 months compared to 60 days in Europe), this strongly increases products' time to market: the European Union Chamber of Commerce in China (EUCCC) estimates “a 3 to 4 year lag between registration in Europe and in China” (2010b, p. 340). In this light, Western pharmas' investments in R&D facilities and the inclusion of China in early-stage international clinical trials can be seen as an approach to accelerate the local drug registration process.

Reconfiguration of Medical Value Propositions

Arguing from another perspective, one of the interviewees states that local R&D centers also allow Western MNCs to proactively build a reputation for innovation. Local research collaborations help to gain further support from the government and key opinion leaders such as doctors, who affect patients' product perception. In addition, large-scale Phase III clinical trials especially unveil a direct access to a broad range of patients (Edwards, 2010). Thereby, Western corporations might overcome their “liability of foreignness” (Zaheer, 1995, p. 343) and improve Western medicine's legitimacy as an alternative to TCM among Chinese patients. The potential to reconfigure medical value propositions in compliance with Chinese consumers' requirements in order to exploit the huge domestic market is considered a key driver for this shift.

Favorable Factor Markets Development

Moreover, MNCs are also attracted by favorable conditions in China's factor markets: labor availability and so-called input factors. China offers both extensive animal resources (rodents or primates) and a large patient pool that is not very risk averse, allowing for fast and cost-efficient recruitment of test persons. In this respect, BMI (2010a) and PwC (2009c) estimate cost saving potentials of up to 67%, which would have significant effects given that Phase I to III clinical trials account for more than 50% of total drug development costs (European Federation of Pharmaceutical Industries and Associations, 2010). Additionally, China's educational market supports the process of upgrading. More than 760,000 science, pharmaceutical and biotechnology engineering, and medical students graduated from Chinese higher education institutions in 2009 (Ministry of Education of China, 2010a, 2010b).4 The growing and highly ambitious talent pool offers large recruitment possibilities at comparably lower labor costs than in other advanced economies—albeit that recruitment may become more difficult as the domestic industry matures. Importantly, one interviewee asserts that the described factor markets allow Western pharmas to conduct R&D on a quality level on par with the Western hemisphere—aside from mere short-term cost savings.

By and large, an improving regulatory framework, the potential to attract a broad range of patients through reconfigured value propositions, and the favorable factor market conditions affect the process of upgrading in the value chain in China. Yet, as an interviewee emphasizes, the shift is not solely a sign of confidence in the Chinese market. It has been propelled by increasing pressure in the triad markets (United States, Western Europe, and Japan), which deemed commitment to this pharmerging market more important.

Shift 2: Outsourcing to Contract Service Providers

In parallel to investing in its own R&D centers, Western pharmas are increasingly outsourcing portions of their R&D and manufacturing processes to China. This shift is embedded in a global retrofit of the traditional pharmaceutical business model and impacts emerging market strategies (PwC, 2008).

Western pharmas initiated this development by outsourcing low-value manufacturing processes such as the production of APIs to Indian or Chinese contract manufacturing organizations (CMOs) (Bartholomew & Shocklee, 2007). China is now the largest API manufacturer in the world with more than 5,000 Good Manufacturing Practice (GMP) certified facilities and an API export value of US$6.6 billion in 2008. Although Chinese CMOs have made efforts to move into high-end API and finished dosage manufacturing, Western pharmas have largely remained reluctant to outsource this final phase to Chinese CMOs since it constitutes the critical last step in the production process (Green, 2010; PwC, 2008).

Along with the CMOs, the availability of Chinese contract research organizations (CROs) has increased, and China currently hosts a fragmented CRO market with 200 to 300 firms (Zhang, 2009). So far, most domestic CROs focus on specific segments of the pharma R&D value chain: standardized chemistry research (e.g., synthesis of compound libraries) and contract clinical development encompass their main scope. Given that China has identified biotech as a key industry in its 12th Five-Year Development Plan (2011–2015), biotech institutes are expected to further enhance their capabilities in early-stage biological research. Moreover, partly due to the increased presence (and competition) of multinational CROs, Chinese CROs' preclinical capabilities have already started to improve further (Boston Consulting Group [BCG], 2006; Zhang, 2009; Zhang & Shen, 2009).

Western pharmas have embraced this development as a means to increase R&D efficacy. For example, Eli Lilly (an MNC that is very active in utilizing sourcing strategies) operates an entire network of R&D partners (e.g., China's Hutchison MediPharma) from Shanghai (Eli Lilly, 2008). Increasingly, Western pharmas even outsource entire research blocks across the different stages in drug discovery and development and emphasize long-term relationships with specific, preferred partners (BCG, 2006; Hare, 2010).

China's Attractiveness for Retrofitting Global Business Strategies

An array of forces led Western pharmas to reconsider their traditional business strategies. In particular, an increasing number of expiring patents and continuously decreasing R&D productivity currently challenge large pharma corporations. According to PwC (2007), “the industry is investing twice as much in R&D as it was a decade ago to produce two-fifths of the new medicines it then produced” (p. 6). Reduced in-house development and increased reliance on contract service providers need to be analyzed within this global context. The question arising is, why does particularly the Chinese environment support Western pharmas to pursue this global shift?

Obviously, the discussed advantages of China's factor markets apply here, too. An abundance of both animal resources and probands as well as the availability of the scientific expertise and medical infrastructure assist in reducing drug development costs. However, it appears to be a trade-off between lower factor costs on the one hand and product safety and IP protection on the other hand that is critical in assessing which operations to outsource.

Collective Pressure to Improve Quality Regulations

“Under pressure from its increasingly vocal population” (Bate & Porter, 2009, p. 3) in light of drug quality scandals, China has lately reinforced quality and safety regulations. Good Laboratory Practice (GLP) and Good Clinical Practice (GCP) certifications for nonclinical and clinical R&D were introduced in 2007 and 2004, respectively, and Chinese GMP certification has been mandatory for manufacturing facilities since 2004 (State Council Information Office [SCIO], 2008). In line with Seo and Creed's (2002) perception of the process of institutional change, the collective critique of quality grievances led to social tensions and thereby induced the change process. For the domestic industry, the regulatory measures may cause smaller firms to exit or to consolidate and invest in quality improvement. Monitoring the quality of regulations as well as improving the reputation of Chinese producers remain major challenges, but both are tedious processes (RDPAC, 2008). This might affect Western pharmas' persisting reluctance especially to outsource finished dosage manufacturing to Chinese CMOs.

Domestic Appreciation of IPR Standards

The issue of patent protection is ever more important for firms that rely on outsourcing partnerships. In this respect, Chinese AIDA Pharmaceuticals's successful lawsuit against four counterfeit drug suppliers (PwC, 2009b) indicates that domestic firms are also beginning to realize the importance of patent protection. Another indicator is the rise in domestic patent grants from approximately 13,000 to 130,000 within nine years (World Intellectual Property Organization, 2011). As an interviewee stated, the appreciation of IPR by domestic players takes up a crucial role to overcome multinationals' IP-related concerns that may otherwise deter outsourcing decisions.

Deteriorating Low-Value Cost Advantages

Improvements in the mentioned areas are important drivers allowing Western pharmas to collaborate with Chinese CROs and CMOs for high-value creation activities. In contrast, China's cost advantages in low value creation activities, historically a major sourcing reason, are eroding as raw material prices and salary levels rise (in 2010 provinces increased minimum wages by 22% to 30% on average [Wang, 2010b]). Although productivity increases may partially compensate this augmentation, Drakulich and van Arnum (2009) argue that other Asian countries such as “Korea and Taiwan are just a few steps behind China and India () and are gaining a foothold as viable pharmaceutical outsourcing contenders” (p. 44). Despite the fact that production costs are less critical in the R&D-intensive pharma industry compared to more labor-intensive businesses, these cost increases should still be monitored since higher value R&D or finished-product manufacturing require higher skilled workforces and thus are more challenging to relocate (Stout, 2009). In the end, though, the migration of particular functions such as production will also depend on sales growth and opportunities in the domestic market.

Shift 3: Expansion of Geographic Scope

Most Western pharmas are located near metro-cities such as Beijing or Shanghai since those regions constitute their primary sales markets. Whereas companies used to concentrate on these tier 1 cities and areas along China's east coast in the past, they have begun to expand into central and western China's untapped markets in the early 2000s (Harper, 2010).

Enlarged corporate sales forces have evidenced this expansion into more and more remote areas. Accompanied by enormous investments in recruitment and training of sales forces, Roche, for example, expanded its number of sales representatives by 35% reaching 1,300 employees in 2009/2010 (Chan, 2010). As an alternative, firms outsource their distribution and sales and marketing functions to contracting partners such as NovaMed Pharmaceuticals (the exclusive promoter for six of Pfizer's oncology products) in order to extend their coverage areas.

Given China's geographical size and complexity, the choice of expansion strategy and target cities are crucial decisions for Western pharmas (Harper, 2010): besides regional economic and demographic differences, geographic proximity also has to be considered. Targeting at first the lower-tier cities (such as Suzhou) close to large hubs (Shanghai) in a “hub and satellite” strategy seems more promising than aiming for larger but remote tier 2 cities. In addition, enhancing coverage in established cities by targeting smaller hospitals or community health centers may improve sales force productivity (IMS Health, 2009). These considerations may have driven Sanofi-Aventis to adapt its organizational structure from a centralized to a regional configuration in China (Sanofi-Aventis, 2008).

“Foreign companies think they will miss development opportunities () if they place a disproportionate focus on the urban hospital markets,” summarizes Yu (cited in “Foreign Pharma in China's Generic Drug Market,” 2010, para. 9). Western pharmas have, therefore, started to expand their market reach both in breadth (toward lower-tier cities) and in depth (within target cities).

Saturation of Industrialized Markets

From the global perspective, low single-digit growth in Japan, Europe, and even in the United States increased the economic pressure on pharma corporations during the past decade. Hence, Western pharmas have become increasingly motivated to refocus their efforts toward pharmerging markets as viable sources for future growth. In their regional expansion, firms can capitalize in particular on China's socioeconomic changes and governmental measures aiming at the improvement of the domestic health care system.

China's Ongoing Urbanization Process

China's urbanization process has accelerated in the past decade and the proportion of urban population rose to 47% in 2010 (United Nations Population Division, 2011). In conjunction with China's economic development, this migration process enlarges Western pharmas' current core target group: the urban “middle class”5 that can afford original research drugs, asserts an interviewee. Still, this trend should be analyzed carefully, since per capita spending on medicines tripled from US$11 in 2002 to US$35 in 2009; the absolute basis remains small (BMI, 2003, 2010a). Moreover Harper (2010) expects that tier 1 cities are “starting to turn into saturated markets” (p. 108). Since these cities, however only account for approximately 20% of China's pharma market, geographic expansion is a promising strategy (IMS Health, 2006; Le Deu et al., 2008).

Renationalization of China's Health Care System

In parallel, the government has increased its efforts to implement a nationwide health care system until 2020. In the 11th Five-Year Development Plan (2006–2010), the government acknowledged, for the first time, that the country's transition process has resulted in a series of social problems such as the lack of an adequate health care system (Pan, 2006). Subsequent to the liberalization of key areas of social provision in the 1980s—which led to the collapse of government-sponsored health care—especially the rural population had largely not been covered by the health care system (Meessen & Bloom, 2007). One interviewee states that “as part of maintaining a harmonious society” the government is now compelled to retransform the health care system. The commitment to invest US$124 billion from 2009 to 2011 into the expansion of national health care coverage and improvement of medical infrastructure is substantial since government expenditure on health care accounted for only 2% of the gross domestic product (GDP) in 2008 (US$88.5 billion), compared to 7.4% in the United States and 8% in Germany (World Health Organization [WHO], 2010a, 2010b, 2010c).6 Western pharmas benefit from this renationalization of China's health care system as it further enlarges the customer base for basic medicines.

Logistic Hurdles and Sales Force Scarcity

However, two drawbacks constrain Western pharmas' expansion: logistic hurdles and availability of sales force. Most drugs are still transported via China's outdated, dispersed, multilevel supply network (Baker & McKenzie, 2009). Western pharmas are, therefore, expected to benefit from governmental efforts to streamline the distribution sector. Besides increased international competition, obligatory compliance with Good Supply Practice (GSP) certification has already reduced the number of distributors from 16,000 in the 1990s to 7,500. In comparison to the United States, where the top three distributors control 90% of the market, the top 10 distributors in China held a combined market share of only 35% in 2008, and China remains fragmented—but Western corporations can gradually reduce their number of distributors (BMI, 2010a; IMS Health, 2009; Zhou, 2007). As the government is set to consolidate and standardize the distribution industry (KPMG, 2010), additional regulatory measures can be expected in light of the health care reform (e.g., maximum wholesale margins).

Second, a sufficiently large sales force is another prerequisite for regional expansion. With annual employee turnover rates of up to 25% and simultaneous salary increases being major concerns (IMS Health, 2009), one interviewee contends that contract sales organizations offer an attractive alternative: they provide not only local expertise but also established distribution networks.

Due to these two constraints, it is even more important to cautiously define the coverage area in order to maximize the bottom-line impact of a regional expansion. Ultimately, China cannot be viewed as one country, but is a dispersed set of provinces and cities that significantly differ in their degree of maturity and therefore attractiveness for Western pharmas.

Shift 4: Diversification of Product Portfolio

In the past, Western pharmas have primarily served the Chinese market with mature, off-patent products. Besides lowering product risk (Jiang, 2005), sustained brand appraisal among Chinese consumers and special price treatments (“innovative pricing category”) allowed Western corporations to expand the life cycle of these original research drugs. In contrast to the originally targeted premium segment, a realignment of product portfolios to the requirements of the broader customer base of the Chinese market has been observed recently (Looney, 2010).

Aside from infectious diseases such as hepatitis B and C, chronic diseases such as cancer or diabetes are among the most prevalent in China (BMI, 2010a). According to the interviewees, Western pharmas pursue three strategies to accommodate the resulting requirements in their product portfolios. The first is the localization of R&D to develop products against diseases that are particularly prevalent in China. Second, they employ in-licensing and acquisition of suitable drug portfolios in order to circumvent lengthy development processes. The third strategy comprises the introduction of products from their “home markets” targeted toward special therapeutic areas.

Accompanying this shift, several Western pharmas have started to diversify their product offerings. “Rather than focusing on China's high-end drug market, foreign companies are changing their strategy to prioritize both patent drug and generic drug markets” (Yu, cited in “Foreign Pharma in China's Generic Drug Market,” 2010, para. 2). For instance, Sanofi-Aventis formed a joint venture with Minsheng Pharmaceutical Group, an OTC product consumer health company (Sanofi-Aventis, 2010). Similar shifts can be observed in the (branded) generics market and in the preventive vaccines sector, where specified (generics) companies but also integrated Western pharmas are making inroads (BMI, 2010a).

China's Untapped Market Potential

Despite double-digit growth rates, many Western pharmas are underperforming in China compared to the overall market growth. China's contribution to incremental business growth is high, the contribution to absolute revenues remains depressed and significantly below China's share of the world market (IMS Health, 2010a; cf. appendix, Figure A1). An adaptation of the local product portfolio toward the needs of Chinese patients indicates the corporations' efforts to better target the Chinese market. In this respect, the TCM market is of particular interest: sales were expected to reach US$28 billion in 2010, making up one third of the complete domestic pharmaceutical market (BMI, 2010a; PwC, 2009b). While Western pharmas have started to exploit TCM as a source of new drug innovation (Barriaux, 2006), commercialization of TCM products still remains due.

Particularities of China's Epidemiological Profile

In China, Western pharmas encounter a different epidemiological profile than in industrialized countries. On the one hand, infectious diseases such as hepatitis B and C, HIV, or syphilis, which are mostly common in developing countries, are of major concern. On the other hand, the consequences of the urbanization process (e.g., adoption of Western lifestyle and nutrition, environmental pollution) and an aging population increase the prevalence of chronic illnesses such as diabetes or cancer. Some of the diseases such as gastric cancer are highly prevalent in China, as the nation accounts for 42% of all cases registered worldwide (BMI, 2010a).

The challenge is to meet these diverse requirements. Western pharmas that intend to target a broader consumer base in lower-tier regions have to account for varying disposable incomes7 and reconfigure their portfolio mix accordingly. China's high out-of-pocket expenditure ratio (49% in 20088; WHO, 2010a) contributes hereto. Although the market share of patented drugs is expected to rise, it accounted for only 9.7% in terms of market value in 2009, while generics and OTC drugs accounted for 62.8% and 27.5%, respectively (BMI, 2010a). This split differs substantially from other countries such as the United States, where patented Rx accounted for 72.7%, but OTC products for only 5.9% in 2009 (BMI, 2010b). Western pharmas' entry into the generics and OTC segments can be seen as a first step toward the requirements of the large markets at the bottom of the socioeconomic pyramid.

Inconsistent Regulatory Developments in Light of the Health Care Reform

Recent regulatory changes present contradicting signals to Western pharma. As part of the health care reform, increased health insurance coverage is expected to widen the potential target group for prescription drugs (BMI, 2010a). While emphasizing the importance of innovative medicines, the government articulated its intentions to further reduce drug retail prices via the NRDL (SCIO, 2009b).

The inclusion of products in the reimbursement lists is, however, of high relevance since it enables access to a large consumer base and hospital tenders (BMI, 2010a). On average, Western pharmas earn 91% of their sales in China from products on the NRDL (IMS Health, 2010d). Yet, China's irregular updates of the NRDL may discourage the launch of innovative medicines in China since the products registered between such updates are not eligible for reimbursement (EUCCC, 2010b).

Moreover, the National Development and Reform Commission (NDRC) recently announced the phase-out of the independent pricing power category for off-patent original research drugs that until now granted a premium over generic alternatives (“NDRC Planning to Restrain Pharmaceutical Companies' Pricing Power,” 2010). The rising pressure to justify higher prices for off-patent medicines additionally challenges Western pharmas since the segment historically constituted its main income source in China (EUCCC, 2007). Hitherto, sales growth of China's pharma market has already been primarily volume driven due to more than 20 price cuts since 2001 (IMS Health, 2009). The challenges for the domestic health care system's shift toward (cheaper) generic alternatives become apparent: Although a demand for innovative medicines may exist, such measures lower firms' incentives to invest in the development of drugs for the Chinese market (EUCCC, 2010b) and underline Western pharmas' current focus shift in China toward volume-driven profits.

This shift is considered the most multifaceted and reflects Western pharmas' ongoing difficulties to penetrate the Chinese market. The newly targeted market segments are fiercer in competition and dominated by local players, but a diversification—with the aim of making products affordable to a larger customer base—is an option that may allow firms to better accommodate China's institutional environment, to capitalize on market growth, and to turn it into higher absolute sales contribution. A diversification of Western pharmas' product portfolios seems promising since the Chinese institutional environment promotes the commercialization of lower-priced drugs while facing a need for innovative medicines at the same time.

Integrated Perspective on Western Pharmas' Value Chain Reconfiguration

Western pharmas reconfigured their presence in China from its primary focus on manufacturing and centralized sales operations in tier 1 cities. Four strategic shifts were identified (cf. Figure 4):

S1: The upgrading along the value chain toward R&D.

S2: The increasing reliance on contract service providers.

S3: The geographic expansion to central and western China.

S4: The realignment of product portfolios to the requirements of Chinese patients.

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Figure 4. The Value Chain Configuration of Western Pharma in China

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The four shifts are closely interrelated and culminate in the attempt to fully exploit this pharmerging market. By and large, the value chain reconfiguration manifests a twofold interest in China: (1) China's rising attractiveness as a (high- and low-value) sourcing market for global operations that induced S2; and (2) China's significance as a future sales market, which has led Western pharma to reposition geographically and realign its offerings to the needs of Chinese patients. This is emphasized by S3 and S4. Interestingly, S1 relates to both aspects: the development of China-specific drugs is intended to support penetration of the domestic market, and the offshoring of global R&D to China is intended to reduce overall development costs. Thus, global sourcing and domestic commercialization constitute two major elements of Western pharmas' China strategy.

China is seen as the most important region among the pharmerging markets, and Roche's relocation of its Asia-Pacific headquarters to Shanghai in 2010 (Wang, 2010a) further emphasizes this perception. However, China's absolute sales and earnings contribution to the overall business performance remains marginal. Western pharmas' current interest in China's commercial opportunities is essentially a bet on expected future market growth. To put it in a nutshell, one interviewee argues that past investments have been “more a sign of commitment () and ensuring that you don't [sic] lose out on something as opposed to something very clear.”

Summary and Managerial Implications

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

After Western pharmas' market entry in the 1980s and 1990s, their presence in China's pharmaceutical market has changed tremendously during the past decade. The article addressed the question: How do Western multinational pharma corporations reconfigure their presence along the value chain in China in light of the country's institutional transition? The introduced value chain–institution matrix enabled a structured and integrated analysis of this question. Ultimately, four distinct but interdependent shifts in the value chain configuration were identified that manifest a twofold interest of Western pharmas in China.

First, for global operations, China is important as a key sourcing and manufacturing location, and gradually also for high-value outsourcing. This suggests that MNCs are increasingly confident in China's regulatory framework and committed to expand their presence via investments in both R&D and manufacturing facilities (S1). Second, the reliance on external partners evidences the emergence of a networked partnership R&D model, a mixture of in-house development, collaborative research, and contract research, which changes “the impetus for innovation” (Quintiles, 2010, p. 5) in the industry (S2). Furthermore, MNCs have started to realize the significance of China's sales market for future growth and have therefore enhanced their effort to target Chinese patients through regional expansion and diversification of product portfolios (S3, S4). These latter shifts are potentially the most multifaceted, which reflects Western pharmas' ongoing difficulties in penetrating the Chinese market and increasing sales and profit beyond their original scope. It remains to be seen to what extent the MNCs will eventually adjust and diversify their product portfolios (S4) as well as their geographical scope across the country (S3). As a result of these four shifts, Western pharmas' presence in China now spans the entire value chain, even though these efforts largely remain a commitment to the future since China's current contribution to global profit is marginal.

During the next few years, a refinement of this strategic approach can be expected, as one expert summarizes that “the Chinese market will gain importance in all value chain segments.” Still, the article unveiled the influences of the institutional environment on corporations' strategic paths with respect to their value chain configuration in China. Institutions will continue to determine China's future attractiveness as a sourcing location as well as the commercial opportunities in the domestic market. Hence, strategists must carefully monitor China's transition process and its impacts to exploit this pharmerging market's potential in all value chain segments.

There are five key implications for corporate strategists. These are based on the acknowledged claim that in order to capitalize on opportunities in the Chinese emerging market, corporations need to develop holistic strategies specifically tailored to the Chinese market.

  • 1.
    Account not only for the country's magnitude but also its regional discrepancies: define target areas and commercialization modes (e.g., self distribution vs. distribution partner) to improve product commercialization.
    The expansion of Western pharmas' reach into China's emerging urban and rural areas provides huge growth potential as previously untapped markets are starting to develop. In this context, market segmentation is essential. Corporations must consider factors ranging from income differentials and spending habits to product preferences across China's regions. As one interviewee asserts, the correlation between provincial GDP and health care growth is the most reliable indicator in defining an appropriate coverage area due to China's federalist structure and provincial funding of the health care system. To account for such regional discrepancies, differential pricing strategies across the country's regions, as considered by Pfizer (BMI, 2010a), might be a successful strategic approach.
    It might also be worthwhile to launch pilot projects to assess potential implications and feasibility of an expansion after a thorough segmentation process. Since it may be challenging to attract sufficient sales representatives in some remote areas, firms may consider sales co-operations as a viable alternative. For larger cities, in contrast, the establishment of single-product-line teams can contribute to augment promotional efficacy.
  • 2.
    Adapt traditional Western product portfolios to China's socioeconomic and regulatory environment: integrate larger shares of branded generics and OTC products to further attract consumers also from the TCM segment.
    Chinese consumers' purchase behavior is characterized by a preference for foreign brands and a tendency to switch products easily if another offering's value is relatively, perceived superior (McKinsey, 2010). Given that doctors and patients gradually embrace the Western evidence-driven medical paradigm as an alternative to TCM and acknowledge Western medicines' effectiveness in treating specific symptoms (BMI, 2010a; Wang & Rockoff, 2010), Western pharmas are well advised to capitalize on these cognitive and brand reputation–related advantages. This is particularly crucial as price competition with Chinese competitors does not seem feasible—neither in the TCM nor in the generics segment.
    In conjunction with the common practice of self-medication (OTC drugs) in China, an initial entry in lower-tier areas with branded OTC products offers a promising expansion strategy. In this respect, advertising campaigns can support capitalizing on the perceived value offering of Western medicine and attracting patients from the vast TCM and domestic generics segments. Here, an inclusion of Chinese patients in clinical trials can be worthwhile since word-of-mouth is among the most significant referrals for Chinese consumers (McKinsey, 2010).
  • 3.
    Anticipate changing factor market advantages with regard to sourcing and production: China as a global sourcing location and as a strategic sales market.
    Several indicators, such as increasing wage levels or the appreciation of the Chinese yuan, suggest diminishing sourcing cost advantages for MNCs in China compared to other countries in Asia. While an abrupt and intense relocation of operations appears rather unlikely, managers need to constantly monitor the country's factor market advantages as they affect China's attractiveness as a sourcing location.
    The interviewees state that the choice of strategy will largely depend on the future expansion of the domestic pharmaceutical market: an increase of domestic consumption and further commercial opportunities would make production migration less reasonable. Clearly, governmental efforts to improve health care infrastructure in urban and rural areas as well as to consolidate distribution networks (SCIO, 2009a) may foster such a market expansion. Consequently, executives need to consider China not only as a global sourcing location but also as a profitable future commercial market in their decisions of which value chain operations to conduct in China over the next decades.
  • 4.
    Consider further upscaling of R&D and increased collaboration with Chinese contract service providers according to improvements of the IPR enforcement.
    EUCCC's (2010a) “Business Confidence Survey 2010” demonstrates that while 66% of respondents perceive formal IPR protection in China as sufficient, only 22% assert that enforcement is effective and adequate. This affirms the perception that the future development of Western pharmas' R&D will largely depend on how the Chinese authorities will align IPR enforcement with the formal regulatory framework.
    Western pharmas must also consider the potential risk of current Chinese collaborators maturing to direct competitors in the future. As an example, the high-speed rail industry demonstrates how quickly Chinese firms can acquire sophisticated capabilities from cooperation with Western firms and subsequently compete with their former partners (Anderlini, 2010). Thus, Western pharmas are advised to refrain from outsourcing core activities such as IP-sensitive formulation development or final product manufacturing.
  • 5.
    Participate in China's transition process by communicating value propositions: induce governmentally facilitated access to innovative medicines and prevent potential measures of protectionism.
    The current regulatory environment compiles an inconsistent institutional environment for Western pharmas in China. On the one hand, China is committed to becoming an innovation-oriented country by 2020, which sustains R&D investments. On the other hand, commercialization of original research drugs is challenged through further prospective price cuts, authorities' preference for generics, and long time lags between NRDL reconfigurations. Despite increasing income levels, the affordability of innovative medicine will strongly depend on governmental health care support.
    At the same time, interviewees expect fortified protectionist measures. One interviewee stated that “lately, there is a trend at the SFDA which creates regulatory barriers for foreign companies.” Linking to China's openness context, BMI (2010a) identifies the emergence of a “China-for-China trend” (p. 5), in which governmental entities promote domestic corporations at the expense of foreign competitors. Since Chinese firms dominate the industry but no “national champion” exists so far, the debate is of particular interest. It is questionable whether the Chinese government “will allow a significant proportion of [the country's growing pharmaceutical sales] to be generated by Western firms” (BMI, 2010a, p. 64).
    In line with Seo and Creed (2002), it is recommended for firms to actively contribute to the current process of institutional change: Western pharmas need to consider effective communication of their value propositions to governmental entities, key opinion leaders, and patients. Consequently, Western pharmas may be able to impact the future design of the NRDL and thereby potentially prevent protectionist measures, which will ultimately affect Western pharmas' success in China.

Contribution and Research Avenues

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

The pharma industry's particularities, such as the conventional high R&D-based business model and the high degree of regulation, might constrain transferability of the discussed patterns to other industries. In addition, Hoskisson, Eden, Lau, & Wright (2000) perceive the generalizability of findings to be constrained given the differing developments in transition economies.

Not withstanding these limitations, this investigation of the corporate restructuring of Western pharmaceutical firms' value chain configuration in response to institutional changes in China sheds light on the issue of how institutions matter. In line with Peng (2006), this article supports the notion that the institutional framework should be considered as a third leg of the strategy tripod due to its particular relevance for strategies in emerging markets (Khanna & Palepu, 1997).

The combined use of institutional theory and the value chain perspective has proven applicable to identify and analyze postentry strategy development in the pharmaceutical industry in China. Researchers may have interest in examining the research framework's applicability to various industries and environments. On the one hand, an exploration of post-entry strategy development in other industries would help to overcome the above-mentioned limitations arising from the focus on the pharmaceutical industry. On the other hand, a comparative study in other emerging (transition) economies (e.g., India or Brazil which are also considered as pharmerging markets), would be of interest to test the applicability to other countries' institutional contexts. Researchers might consider investigating whether and to what extent the discussed findings can be considered general patterns or rather China-specific trends. Hence, further research is needed to address the question of how institutions influence corporate strategies in different markets and industries at varying points in time. The value chain–institution matrix provides a well-structured, analytical approach and allows both academics and practitioners to analyze implications of institutional transitions.

Notes

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

1. Here, pharmaceutical market is defined as the sum of patented, generic, and OTC products. TCM is, thus, excluded. The market is calculated at ex-manufacturer prices in terms of local currency. The report specifically audits the hospital sector (in China: 70% to 80%) and extrapolate findings to the residual, unaudited market.

2. Based on data derived from ClinicalTrials.gov, a registry of globally conducted clinical trials, operated by the United States National Institutes of Health (www.clinicaltrial.gov) (as of February 11, 2011).

3. The HNTE status is subject to high requirements. For example, a company must have been established in China for at least one year, must be the owner of the IP (self-R&D or acquisition), and must derive a large proportion of income from high-tech services. Moreover, at least 30% of staff should have tertiary education (Ernst & Young, 2008).

4. 2009 graduates from regular higher education institutions. Here, engineering includes “chemical engineering and pharmaceuticals” and “biotechnology” students.

5. The definition of China's “middle class” is vague, and given China's regional discrepancies, an appropriate reference income remains disputed. In 2006, the China National Research Association specified that besides income level the criteria education, profession, societal influence, savings, and holidays must be considered. All sources agree that the urban middle class will rapidly expand in the coming decades (Wagner, 2010).

6. The calculation is “General government expenditure on health as % of total expenditure on health” multiplied by “Total expenditure on health as % of GDP.”

7. According to the National Bureau of Statistics of China (NBSC; 2009), average disposable incomes for urban and rural residents in 2008 were CNY15,781 (US$2,272) and 4,761 (US$686), respectively.

8. The calculation is “Private expenditure on health as % of total expenditure on health” multiplied by “Out of pocket expenditure as % of private expenditure on health.”

Biographical Information

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

Alexander Dierks is a Master of Science graduate in International Business from HEC Paris in Jouy-en-Josas, France (2012). He previously received his bachelor's degree in General Management from EBS Business School in Oestrich-Winkel/Wiesbaden, Germany (2011) and also studied at Peking University in Beijing, China. His research interests are in the areas of emerging markets focusing on China, international business, value chain transformation and cluster theory.

Christian Kuklinski is a Doctoral Candidate at the Automotive Institute for Management (AIM), EBS Business School, Wiesbaden, and Guest Researcher at the China Europe International Business School (CEIBS), Shanghai. After growing up in Asia, he moved to Germany while his strongest personal and professional interests drew him often back towards Asia (and Latin America). His primary research interests are in the areas of emerging markets, international business, business development, strategic foresight and strategic fit.

Dr. Roger Moser is Director of the ASIA CONNECT Center (University of St. Gallen, Switzerland). He has lived with his family in India and China for several years establishing different organizations and analyzing business development mechanisms in emerging markets. Aside from consulting firms of distinct industries in the area of business development in India and China, he is also Visiting & Adjunct Faculty at Indian Institute of Management (IIM) Bangalore & IIM Udaipur focusing on access-based infrastructure business model development for rural areas.

References

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX

APPENDIX

  1. Top of page
  2. Abstract
  3. Introduction
  4. Pharmerging China
  5. Theoretical Framework
  6. Methodology
  7. Findings
  8. Summary and Managerial Implications
  9. Contribution and Research Avenues
  10. Notes
  11. Biographical Information
  12. References
  13. APPENDIX
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Figure A1. Top 20 Global Corporations China Market Performance

AZ: AstraZeneca; BI: Boehringer Ingelheim; BMS: Bristol-Myers Squibb; GSK: GlaxoSmithKline; J&J: Johnson & Johnson; MSD/SP: Merck Sharp & Dohme / Schering-Plough

Source: IMS Health, 2010a, p. 3.

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