Chinese officials are saying that they will be cracking down on drug makers that are allegedly making unsafe medicine capsules that were made from industrial gelatin, a very dangerous substance.
The government has said they will be investigating 43 capsule manufacturers in the Zhejiang province to see if they can find the source of these dangerous medicines. The Chinese government has also recently conducted new harsher regulation against illegal drugs and other substances which are being reportedly made in “makeshift” factories.
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This whole domestic drug issue could help pave the way for certain American Pharmaceutical companies to come into China. Citigroup Inc. (NYSE:C) says that China will have a $200 billion pharmaceutical market in 2020 which would make it the second largest in the world.
The aging population, expanding health care, disease growth and urbanization are just a few reasons why American drug companies will be able to start relying on China for a huge chunk of sales. In addition to drug companies, pharmacies are expected to increase from 36,000 to 170,000 this year.
This would be a great chance for CVS Caremark Corporation (NYSE:CVS) or Walgreen Company (NYSE:WAG) to get Chinese exposure and profit from this growing trend. According to Citigroup Inc. (NYSE:C), Merck & Co., Inc. (NYSE:MRK) and Eli Lilly & Co. (NYSE:LLY) are the best drug companies for the Chinese expansion. Both companies have already started accelerating their exposure in China.
As you can see, there is a good amount of opportunity to gain exposure in China if you are a drug company. The huge population needs a more reliable, stable way of getting their medicine.
That is where US companies come in. They are more reliable and have to follow certain protocol which ensures the safety of the products they are providing for their customers. Also, it would be great if China imported some of our goods for a change, right?
Unfortunately, a lot of patents are set to expire this year and in the coming years which signals a low point for pharmaceutical firms. Once they are able to re-patent their drugs and innovate to find better solutions, drug companies will be in a great spot to capitalize on their pipeline of drugs, not only in the US but China as well.
Overall, China is currently experiencing some troubles with their domestic drug makers which may allow US companies to come in and provide a more reliable service and make lots of money in the process. Watch out for any possible Chinese government interference and drug patent expirations.