It's been tough going for big pharmaceutical companies in China, weighed down by tighter hospital budgets, tough competition, and more regulation. Ryan Brookes reports many are opting to tie-up with small local firms as a backdoor to get back into the world's second-largest drug market.
Big Pharma's clawing its way back into China -- thanks to the little guys. International drug brands have been having a tough time in the world's second biggest medicine market - Squeezed out by tight hospital budgets and cheaper local rivals with government money behind them. Now, big names like GlaxoSmithKline are saying, if you can't beat them, join 'em... (SOUNDBITE) (English) REUTERS CORRESPONDENT, ADAM JOURDAN, SAYING: "We've seen here a flurry of deals between big, global drug makers and smaller, local nimble rivals. And what these guys are offering is a sort of back door into the market. The industry here is simply more complex for these big international firms. If you have a local partner that has connections in China, who is able to get approval through more quickly, is able to share the risk and to actually lower your costs, then that can be a attractive proposition and a big lure for global Big Pharma." Healthcare mergers in China almost tripled last year - and it's a win-win situation. Big Pharma gets its foot back in the door... the small guys get a big lift... And Beijing's plan for a 'made in China' drug industry is front and centre. (SOUNDBITE) (English) REUTERS CORRESPONDENT, ADAM JOURDAN, SAYING: "They're looking to encourage scientists to come back from abroad, set up shop in China, they're giving preferential tax rates, they're giving government funding and backing, they're opening these science parks and units around China to foster an idea of innovation. And what that means is that some of these smaller firms, these smaller startups, even with only a handful of people, maybe 25-30 people in-house, they're able to punch far above their weight against their much bigger rivals that are coming in from Europe, the USA or Japan." Experts say China is beating drug industry hotspots like India to become Asia's number one for pharmaceutical tie-ups, and the numbers speak for themselves. China's public healthcare spending is expected to hit nearly 1-and-a-half trillion dollars by 2020.