Rising Diabetes Prevalence Provides Strong Growth Opportunities

BMI View: The rising diabetes prevalence in China, coupled with the at-present significant unmet treatment, means there are strong opportunities for pharmaceutical firms focusing on diabetes care in China. However, we highlight that accessibility to healthcare services and treatment options will be a key obstacle to pharmaceutical firms looking to maximize this commercial potential

According to a study published in the Journal of the American Medical Association (JAMA), researchers have estimated that 11.6% of China's population, or 113.9mn people, are diabetic (based on approximately 99,000 samples taken in 2010), which is the highest prevalence for a country globally. This figure was higher than the estimate given by a study in the New England Journal of Medicine (92mn) in 2010, [1] indicating rising commercial potential. Some key findings from the JAMA study include:

  • Prevalence among men was 12.1% and women was 11.0%;

  • Prevalence of undiagnosed diabetes was 8.1%;

  • Prevalence of pre-diabetes was 50.1%, and this prevalence was higher amongst older people, in urban areas, and in economically developed regions;

  • Only 25.8% of diagnosed diabetic patients receive treatment, while out of those, only 39.7% had adequate glycaemic control.

During the 1980s, the prevalence of diabetes in China was under 1%, which is typical for a developing country. The economic boom of the following decades resulted in more people adopting sedentary lifestyles and changing their eating patterns. This shift is more apparent in urban areas than rural ones, where the traditional way of life is still relatively common.

Novo Nordisk: A Dominant Player
Chinese Insulin Volume Market Share Of The Top Five Companies (May 2013)

Rising Diabetes Prevalence Provides Strong Growth Opportunities

BMI View: The rising diabetes prevalence in China, coupled with the at-present significant unmet treatment, means there are strong opportunities for pharmaceutical firms focusing on diabetes care in China. However, we highlight that accessibility to healthcare services and treatment options will be a key obstacle to pharmaceutical firms looking to maximize this commercial potential

According to a study published in the Journal of the American Medical Association (JAMA), researchers have estimated that 11.6% of China's population, or 113.9mn people, are diabetic (based on approximately 99,000 samples taken in 2010), which is the highest prevalence for a country globally. This figure was higher than the estimate given by a study in the New England Journal of Medicine (92mn) in 2010, [1] indicating rising commercial potential. Some key findings from the JAMA study include:

  • Prevalence among men was 12.1% and women was 11.0%;

  • Prevalence of undiagnosed diabetes was 8.1%;

  • Prevalence of pre-diabetes was 50.1%, and this prevalence was higher amongst older people, in urban areas, and in economically developed regions;

  • Only 25.8% of diagnosed diabetic patients receive treatment, while out of those, only 39.7% had adequate glycaemic control.

During the 1980s, the prevalence of diabetes in China was under 1%, which is typical for a developing country. The economic boom of the following decades resulted in more people adopting sedentary lifestyles and changing their eating patterns. This shift is more apparent in urban areas than rural ones, where the traditional way of life is still relatively common.

BMI expects the prevalence of diabetes to increase further as the country progresses. Under the 12th five-year plan, the Chinese government is keen to modernise its economy through various ways such as boosting competitiveness in the manufacturing sector, and shifting towards new high-growth innovative engines (eg, biotechnology, clean energy etc.), therefore accelerating the growth of rural and urban income. Consequently, with rising incomes and overall quality of life, more people will have a more sedentary lifestyle and a more- processed diet, and therefore the corresponding rise in obesity due to such lifestyles, and this will contribute to the rising prevalence of diabetes.

Such rises in lifestyle-related diseases represent a strong growth opportunity for pharmaceutical companies. Three top multinational companies involved in diabetes management are Novo Nordisk, Sanofi and Eli Lilly. Diabetes care is the key product portfolio for Novo Nordisk, and the company has the majority of the market share in China. In Q213, Novo Nordisk reported that at the end of May 2013, it held a 60% share of the total insulin market in China.

Novo Nordisk: A Dominant Player
Chinese Insulin Volume Market Share Of The Top Five Companies (May 2013)

At the same time, it reported a 14.5% increase in sales from DKK1,550mn (US$267.7mn) in Q212 to DKK1,774mn (US$311mn) in Q213. [2] Assuming that only 29.4mn (out of the 113.9mn) people received some form of diabetic treatment, this leaves a large unmet diabetic need for Novo Nordisk and other pharmaceutical firms to tap into in China.

Challenges To Meeting China's Diabetic Needs

While there is huge potential in China's diabetic market, we note that there are several challenges. One of the key hurdles as pointed out by the study is that diabetes is regularly undiagnosed, and that the treatment rate is low. Despite having a near universal health coverage in the country, per-capita expenditure on healthcare and pharmaceutical remains relatively low at US$326 and US$52 respectively. Consequently, most patients will not be able to maintain diabetic care, as it requires lifelong treatment.

In addition to a low budget for treatment, physical accessibility to health facilities is another issue. The number of medical professionals and health facilities declines as patients reside further away from city centres, leading to further under-diagnosis of the condition. To complicate matters, should there be a lack of awareness in diabetes management, patients may not maintain treatment compliance.

While multinational pharmaceutical firms now hold the largest insulin share in the market, we highlight that the Chinese government is keen to keep healthcare affordable for its people. In its 2012 revision of the National Essential Drug List, insulin was one of the listed items. [ 3] Consequently, price containment will be a key theme going forward, affecting profit margins, although pharmaceutical firms will benefit from the increased volume sales. Meanwhile, all three firms, Novo Nordisk, Sanofi and Eli Lilly, have been recently investigated by the Chinese government for alleged bribery, while the government also visited the Novo Nordisk's facility. The firm stated that it was not aware of being part of the ongoing corruption investigation.

Recent Developments In China's Diabetes Sector

August 2013

Japanese drugmaker Takeda secured marketing authorisation for its Nesina (alogliptin) drug from the Chinese regulatory authorities, the company confirmed in a press release. The drug was developed as a means to treat patients suffering from Type II diabetes. Nesina will be co-promoted with Sanofi in the country.

May 2013

Medtronic entered into an innovative partnership with the National Institute of Hospital Administration (NIHA), a think tank under China's National Health and Family Planning Commission, to carry out a series of research projects focusing on building an integrated care pathway for patients with Type I diabetes. The partnership is focused on working with an important organisation to access data that can be used to understand the economic and clinical value of therapies and how they can be best utilised in a patient population.

March 2013

Merck KGaA entered into collaboration with Bristol-Myers Squibb (BMS) for the co-promotion of the Type II diabetes drug, Glucophage ( metformin ) under different formulations in China. Under the terms of the agreement, Merck KGaA and BMS will co-promote Glucophage in China through a profit-sharing arrangement.

Novo Nordisk's latest offering of durable insulin delivery devices, NovoPen 5 , was approved by the Tianjin Food and Drug Administration for launch in China. NovoPen 5 contains the same features as the NovoPen 4 in terms of design and functionality, and the insulin delivery system is identical in both devices. However, the addition of a memory function in NovoPen 5 allows the patient increased confidence, compared with previous devices. The memory function helps patients remember their last injection and answer the question 'Did I take my dose or not?', which is a common situation for people living with diabetes. A usability study has shown that 78% of patients would feel more confident using an insulin pen with a memory function than their current pen. Therefore, it can be a help for patients to gain reassurance in their daily diabetes treatment.

September 2012

Novo Nordisk invested an additional US$100 mn to expand its state-of-the-art science facilities in Beijing, China. The new 12,000 m 2 centre will make it possible to increase the number of science employees from the current 130 to 200, with extra space available to accommodate additional future growth. With this expansion, Novo Nordisk also fulfils its key strategic objective to ensure the full range of protein research capabilities in China.

June 2012

Eli Lilly established the Lilly China Research and Development Centre (LCRDC) to underline its commitment to global drug innovation. LCRDC will focus on developing innovative diabetes medicines that can be customised according to the requirements of patients to delay the progression of diabetes. By establishing the LCRDC, Eli Lilly has demonstrated its focus on discovering and developing novel medicines for Chinese people with diabetes, said Jan M. Lundberg, the president of Lilly Research Laboratories.

May 2012

Sanofi announced the inauguration of a new assembling and packaging line to produce its pre-filled insulin pen Lantus SoloStar (insulin glargine ) at its Beijing plant. During the ceremony, CEO Christopher Viehbacher said the second phase of the US$90mn project will be to install a high-tech cartridge aseptic production line. The facility is capable of manufacturing 48mn units annually.

[1] Business Monitor Online - Industry Trend Analysis - Diabetes Prevalence 'Doubles' - March 26 2010.

[2] Business Monitor Online - Industry Trend Analysis - Strong Multinational Growth Performance Continues - August 19 2013.

[3] Business Monitor Online - Industry Trend Analysis - National Essential Drug List Update Released - March 22 2013.

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