Chinese Pharmaceutical Market: Forecasts and Outlooks

2014-2024

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Contents

1.1 The Chinese Pharmaceutical Market Review

1.2 The Chinese Pharmaceutical Market Segmentation

1.3 Why You Should Read This Report

1.4 How this Report Delivers

1.5 Main Questions Answered by This Report

1.6 Who is this Report For?

1.7 Research and Analysis Methods

1.8 Frequently Asked Questions (FAQ)

1.9 Associated Visiongain Reports

1.10 About Visiongain

2.1 Chinese Pharmaceutical Market in 2013

2.2 China in the Global Pharmaceutical Market, 2013

2.3 Chinese Pharmaceutical Market, 2014-2024

2.4 Overview of Sales Channels in the Chinese Market in 2013

2.5 Leading Disease Areas in the Chinese Market in 2013

2.6 Overview of Pharmaceutical Manufacturing China, 2013

2.7 Overview of Outsourced Pharmaceutical Research & Development China, 2013

2.8 The Top 30 Domestic Chinese Companies: A Fragmented Market

2.9 Multinational Companies and Their Chinese Strategies

2.10 Crucial Chinese State Bodies

2.11 High Growth in Spite of Low Healthcare Spending as a Proportion of GDP

2. Overview of the Chinese Pharmaceutical Market

1. Report Summary

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Contents 2.12 Price Inflation and Out-of-Pocket Payments

2.13 Picking up the Tab

2.14 Healthy China 2020: ‘Unprecedented in Human History’

2.15 Achievements and Potential of the Healthy China 2020 Initiative

2.16 Expanding the EDL

2.17 ‘The Black Hole for Healthcare Funding’

2.18 Paying for Chronic Diseases

2.19 The Anhui Model: The Unlikely Shape of Things to Come?

2.20 Compulsory Licences: Ominous or Insignificant Development?

3.1 Disease Prevalence in China, 2014-2024

3.2 Incidence of Diseases in China, 2014-2024

3.3 Disease Mortality in China, 2014-2024

3.3.1 Cardiovascular Diseases: Leading Cause of Mortality in 2012

3.3.2 Stroke: China’s Number One Killer, 2012

3.3.3 Forecast Chinese Broad Cause Mortality: The Rising Toll of Cancer

3.3.4 Forecast Specific Causes of Death in China: Lung Cancer Critical Threat to Health

4.1 Hospital Sales are the Dominant Channel

4.2 Distribution Channels are Fragmented and Dispersed Compared to Western Counterparts

4.2.1 Issues with China’s Pharmaceutical Distribution Model

4.2.2 Problems with Fragmented Distribution Networks

4. Sales Channels in the Chinese Pharmaceutical Market, 2014-2024

3. Epidemiology of Disease in China, 2014-2024

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Contents 4.2.3 Consolidation Within the Distribution Network is Underway

4.3 Sales Channel Forecast, 2014-2024

4.4 Hospital Sales, 2014-2024

4.4.1 Hospitals: Foundation of the Chinese Healthcare System

4.4.2 Chinese Hospitals in the Era of Reform

4.5 Retail Pharmacies, 2014-2024

4.5.1 Difficulties in Retail Pharmacy Market Estimates

4.5.2 Prospects for the Retail Pharmacy Sales Channel Driven Through Over the Counter

(OTC) Sales, 2014-2024

4.5.3 Domestic Chinese OTC Drug Manufacturers, 2013

4.6 Other Sales Channels, 2014-2024

4.6.1 Other Sales Channels – The “Grey” Pharmaceutical in China

4.6.2 Rural Healthcare Investment

4.7 The World’s Largest Sales Force

4.7.1 Chinese Contract Sales Market Forecast, 2014-2024

4.7.2 Concerns over Bribery in Chinese Pharmaceutical Sales, 2013

5.1 Conventional Pharmaceuticals Are the Critical Component of the Market, 2013

5.2 Product Classes in the Chinese Market: Market Projections 2014-2018

5.3 Product Classes in the Chinese Market: Market Projections 2018-2024

5.4 Small Molecules: Crucial Components of the Chinese Pharmaceutical Market Through to

2024

5.4.1 Generics to Remain the Foundation of the Market, 2014-2024

5.4.2 Market Structure Favours Generics

5. Leading Product Classes in the Chinese Market, 2014-2024

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Contents 5.4.3 Health Reforms Increase Opportunities for Branded and Generic Drugs

5.4.4 Branded Generics: A Way Forward in China?

5.4.5 AstraZeneca and Pfizer Leading in Branded Generics

5.4.6 Drivers and Restraints in the Small Molecules Pharmaceuticals Segment, 2014

5.5 Traditional Chinese Medicine, 2014-2024

5.5.1 TCM: A Unique Phenomenon

5.5.2 TCM Use is Ubiquitous Across China

5.5.3 Governmental Promotion of TCM

5.5.4 Expansion of TCM

5.5.5 Players in the TCM Field

5.5.6 Drivers and Restraints in the TCM Field, 2014

5.6 Chinese Biological Drug Market, 2014-2024

5.6.1 Vaccines: A Major Class of Biological Product in China

5.6.2 Roche Finding a Way Forward with Branded Biologics

5.6.3 China Leads the Way on Biosimilars

5.6.4 Chinese Biosimilar Development Guidelines Set for Release

5.6.5 Biosimilars Account for Less than Half of Biotech Revenues in China

5.6.6 Biosimilar Insulin Uptake in China 2014

5.6.7 Bio-Betters Made in China

5.6.8 Overview of Chinese Biosimilar Manufacturers

5.6.9 Drivers and Restraints in the Biologics Segment, 2014

6.1 China’s Shifting Disease Burden

6. Leading Therapeutic Areas, 2014-2024

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Contents 6.2 Forecasted Disease Areas in the Chinese Market, 2014-2024

6.3 The Rise of Diabetes and Restriction on Antibacterial Drug Spending: Market Share by

Disease, 2014-2024

6.4 Infectious Diseases Segment, 2014-2024

6.4.1 Infectious Diseases Market Forecast, 2014-2024

6.4.2 Antibiotics: China’s Main Medicine

6.4.3 Cephalosporins: China’s Antibiotic of Choice

6.4.4 Antibiotics Stewardship in China: Fighting Against the Tide

6.4.5 Developing Antibacterials in China for China

6.4.6 Vaccine Market Forecast, 2014-2024

6.4.7 Vaccinating Hepatitis B in China

6.4.8 Fragmented Vaccines Sector

6.4.9 Multinational Vaccine Manufacturers Cutting Their Share

6.4.10 Treating China’s HIV and Hepatitis Cases

6.4.11 Drivers and Restraints for the Infectious Diseases Market, 2014

6.5 Cardiovascular Segment 2014-2024

6.5.1 Cardiovascular Disease Market Forecast, 2014-2024

6.5.2 Modelling the Chinese Hypertension Market, 2014-2024

6.5.3 Forecast Hypertension Market in China, 2014-2024

6.5.4 Leading Products Classes in Hypertension Market, 2013

6.5.5 Multinationals Dominate the Chinese Hypertension Market, 2013

6.5.6 Modelling the Chinese Dyslipidaemia Market, 2014-2024

6.5.7 Forecast Dyslipidaemia Market in China, 2014-2024

6.5.8 Cardiovascular Disease is a Major Focus for Western Companies

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Contents 6.5.9 TCM Also Heavily Focused on Cardiovascular Treatments

6.5.10 Domestic Companies in the Cardiovascular Segment

6.5.11 Drivers and Restraints in the Cardiovascular Segment, 2014

6.6 Anticancer Drug Market 2014-2024

6.6.1 Anticancer Drug Market Forecast, 2014-2024

6.6.2 Cancer: The Price for China’s Rapid Modernisation?

6.6.3 Incidence of Cancer in China, 2014-2024

6.6.4 Targeted Therapeutics Making Headway in Market

6.6.5 Cost of Treatment Drives Anticancer Drug Choice in China

6.6.6 Tailoring Cancer Treatments for China

6.6.7 Biomarker Testing in China

6.6.8 Domestic Participants in the Anticancer Drugs Market

6.6.9 Drivers and Restraints in the Oncology Segment, 2014

6.7 China: The Diabetes Centre of the World, 2014-2024

6.7.1 Modelling the Chinese Diabetes Treatment Market, 2014-2024

6.7.2 The Largest Diabetes Drugs Market in the World: Forecast 2014-2024

6.7.3 Diabetes in a Form Characteristic of China

6.7.4 Diabetes Management in China

6.7.5 Novo Nordisk, Sanofi and Lilly: The Diabetes Big Three Compete for the Chinese

Market

6.7.6 Other Companies Aiming for the Diabetes Segment

6.7.7 Drivers and Restraints in the Diabetes Segment, 2014

6.8 Central Nervous System (CNS) Diseases Market 2014-2024

6.8.1 Forecast CNS Disease Market, 2014-2024

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Contents 6.8.2 Modelling the Chinese Depression Drugs Market, 2014-2024

6.8.3 Forecast Depression Treatments Market in China, 2014-2024

6.8.4 Antidepressants Market by Product Class, 2013

6.8.5 Modelling the Schizophrenia Drugs Market in China, 2014-2024

6.8.6 Forecast Antipsychotic Drugs Market in China, 2014-2024

6.8.7 Leading Antipsychotic Drugs in the Chinese Market, 2013

6.8.8 The Ageing Population of China Will Drive Growth for CNS Drug Sales

6.8.9 Neurodegenerative Diseases and Dementia Set to Rise

6.8.10 Pain Relief a New Priority for China

6.8.11 Drivers and Restraints in the CNS Diseases Segment, 2014

6.9 Respiratory Diseases Segment, 2014

6.9.1 Respiratory Drugs Market Forecast, 2014-2024

6.9.2 Modelling the COPD Market in China, 2014-2024

6.9.3 COPD Market Forecast, 2014-2024

6.9.4 Modelling the Chinese Asthma Treatment Market, 2014-2024

6.9.5 Asthma Medical Market Forecast, 2014-2024

6.9.6 Leading Respiratory Drug Classes, 2013

6.9.7 AstraZeneca Leading Respiratory Diseases Research

6.9.8 Drivers and Restraints in the Respiratory Diseases Segment, 2014

6.10 Autoimmune/Inflammatory Diseases Segment, 2014

6.10.1 Autoimmune and Inflammatory Diseases Market Forecast, 2014-2024

6.10.2 Diagnosis is Crucial and Biological Drugs are Often Used

6.10.3 TCM Use is Widespread, as are Biosimilars

6.10.4 Drivers and Restraints for Autoimmune and Inflammatory Diseases Segment, 2014

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Contents 6.11 Other Disease Areas

7.1 ‘Workshop of the World’: China as Pharmaceutical Manufacturing Hub

7.2 Chinese Contract Manufacturing Since the 1990s

7.3 The Burgeoning Contract Manufacturing Market in China, 2014-2024

7.4 Outsourcing to Emerging National Markets from Developed Markets

7.4.1 Demand for Contracted Services in China

7.4.2 Domestic Demand for Pharmaceutical Contract Manufacturing Services

7.5 Manufacturing Partnerships for Multinationals and Small Domestic Companies

7.6 Improved Manufacturing Regulations in China

7.6.1 New Regulations for Excipients and Guidance for API Manufacturing 2012-2013

7.6.2 What Are the Consequences of Stricter Manufacturing Regulations in China?

7.7 Chinese CMOs Are Investing in Bio-pharmaceutical Manufacturing

7.8 Drivers and Restraints for Chinese CMOs, 2013

7.9 China’s Manufacturing Output, 2011-2013

7.9.1 Chinese Pharmaceutical Manufacturing Output to Treble in Value by 2024

7.9.2 TCM and Related Herbal Drugs: The Leading Area of ‘Pharmaceutical’ Output by 2024

7.9.2.1 The 12th Five-Year Plan Favours the TCM Industry

7.9.3 Pharmaceutical Formulations: Chinese Output to 2024

7.9.4 APIs: China to Retain its Dominance of Global Export Markets

7.9.4.1 Tighter Regulation to Bring China’s API Standards in Line with International

Norms

7.9.5 Biologics Manufacturing: the Fastest-Growing Area of Chinese Pharmaceutical

Industry Output to 2024

7. Chinese Pharmaceutical Manufacturing, 2014-2024

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Contents 7.9.5.1 China Targeting Biomanufacturing Leadership

7.9.6 Medical Devices Output to 2024

7.9.7 Chinese Medical Device Manufacturers Continuing to Ascend the Value Chain

7.10 Chinese Manufacturing: Conclusions

8.1 China: Research Hub for Asia Pacific and Beyond

8.2 China’s Contract Research Outsourcing Market

8.2.1 Double Digit Growth in the Chinese Contract Research Outsourcing Market, 2014-

2024

8.3 Clinical Trials are the Heart of the Chinese CRO Market

8.3.1 Over 2,000 Active Clinical Trials in China in 2013

8.3.2 Chinese Government Intervention and Promotion of Clinical Trials Research

8.3.3 New Guidelines for Phase I Trials

8.3.4 Improving China’s Clinical Trial Data Management

8.3.5 Increased Outsourcing of Preclinical Research to China

8.3.6 China and India are Crucial to Growth in Drug Discovery Outsourcing

8.3.7 Multinational Contract Research Organisations in China

8.4 Major Domestic Chinese Contract Research Organisations

8.4.1 Drivers and Restraints for Contract Research Outsourcing in China, 2014

8.4.2 Innovation in the Domestic Chinese Pharmaceutical Industry

8.4.3 Domestic Drug Discovery in China

8.4.4 China Still Lacks First-Class Laboratory Facilities

8.4.5 Innovative Biotechnology in China

8.4.6 China Has the World’s Largest and Most Affordable Genomic Sequencing Facilities

8. Chinese Pharmaceutical R&D, 2014-2024

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Contents 8.4.7 Critical Mass in China for Biomarker Testing Breakthroughs

8.4.8 Chinese Regenerative Medicine

8.4.9 Stem Cell Research in China

8.4.10 Stem Cell Controversies

8.5 Chinese Pharmaceutical Research: Conclusions

9.1 Strengths: China Has Major Healthcare Challenges and is Paying to Improve its Treatment

System

9.2 Domestic Disease Burden Growing With GDP

9.3 The Market to Date is Underdeveloped

9.4 The Government’s Investment in Healthcare

9.5 Progressive Urbanisation Continues to Drive Healthcare Spending

9.6 Weaknesses: China is Fundamentally Different from Other Pharmaceutical Markets

9.7 Chinese Healthcare has Deep Systemic Challenges

9.8 China’s Domestic Solutions to Medical Need

9.9 Fears over Bribery and Corruption in the Chinese Pharmaceutical Market

9.10 IP Remains an Issue, 12 Years After China Joined the WTO

9.11 Opportunities: The Scramble for China

9.12 Diversifying Portfolios for China

9.13 Tailoring Portfolios for the Market

9.14 Building Closer Links with the Domestic Chinese Pharmaceutical Industry

9.15 Threats: A House Built on Sand?

9.16 Making a Profit Under the Anhui Model

9. Qualitative Analysis of the Chinese Pharmaceutical Market 2014-

2024

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Contents 9.17 Growth Via the State: Will this Work Longer Term?

9.18 How Long will Outsourcing be Worthwhile?

9.19 Social Factors: Who are the Chinese People, and What Do They Want from the

Pharmaceutical Industry?

9.20 The Ageing Dragon

9.21 The Obesity Epidemic

9.22 The Effect of Social Factors on Medical Treatment in China

9.23 Technological Factors: Will China Domesticate Healthcare Technologies?

9.24 Economic Factors: Can the Chinese Miracle Continue, and What Happens to Healthcare if

it Doesn’t?

9.25 China’s Rise as an Economic Superpower

9.26 What are the Underlying Problems?

9.27 The Five-Year Plan – What Happens Next?

9.28 Political: What Will the Chinese Government Do?

10.1 Interview with Dr. Greg Scott, Founder, ChinaBio Group

10.1.1 Future Prospects for the Chinese Pharmaceutical Market

10.1.2 Cancer is at the Forefront of Drug Development in China

10.1.3 Biologics in China – Biosimilars to Lead the Way

10.1.4 The Anhui Model - Discussion

10.1.5 IP Protection in China is Robust

10.1.6 Consolidating the Fragmented Chinese Market

10.1.7 Access to the Chinese Pharmaceutical Market

10.1.8 The Unsustainable Anhui Model Leads to a Drop in Quality

10. Research Interviews

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Contents 10.1.9 IP Protection in China is Robust

10.1.10 Consolidating the Fragmented Chinese Market

10.1.11 Access to the Chinese Pharmaceutical Market

10.2 Interview with Benjamin Shobert, Teleos Consulting

10.2.1 Drug Revenues and the Anhui Model

10.2.2 ‘Heaven is High, and the Emperor is Far Away’: Government Policy in Theory and its

Implementation in Practice

10.2.3 IP and Technology Transfer in China

10.2.4 Big Pharma Strategies in China

10.2.5 One Country, Two Healthcare Systems?

10.2.6 Innovation in China

10.2.7 The Big Picture in the Next Ten Years

10.3 Interview with Justin Chakma, Thomas, McNerney & Partners

10.3.1 Differences Between Innovation in China and in Other Emerging Markets

10.3.2 Funding Advantages for Chinese Biotech

10.3.3 Investment Targets for Chinese Venture Capital

10.3.4 Dominance of Oncology in Chinese R&D

10.3.5 Restraints on Innovation in China

10.3.6 Important Coming Trends in Chinese R&D and Venture Capital Funding

10.4 Interview with Julie Li, Strategy Manger, China Resources Double-Crane

Pharmaceuticals, China

10.4.1 Multinational Dominate Drug Discover in China

10.4.2 Cancer and Chronic Disease are Critical

10.4.3 The Impact of Control on Antibacterial Drug Prescriptions

10.4.4 New GMP Regulation Will lead to Consolidation of Drug Manufacturers

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Contents

11.1 China: The Crucial Growth Market for Pharmaceuticals, 2014-2024

11.2 The Leading Therapeutic Areas Within the Chinese Pharmaceutical Market

11.3 Top Ten Pharmaceutical Companies Dominated by Domestic Firms

11.4 Healthcare Reforms Will Put Greater Emphasis on Pharmacy Sales

11.5 International Pharmaceutical Companies Use China’s Outsourcing Capacity

11.6 Generic Drugs and TCM Remain Crucial to the Chinese Pharmaceutical Market

11.7 China: The Greatest Challenge and Opportunity for the Pharmaceutical Industry

11. Conclusions

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Chinese Pharmaceutical Market: Forecasts and Outlooks 2014-2024

5.6.6 Biosimilar Insulin Uptake in China 2014

The Chinese insulin market was worth $1.15bn in 2013, with insulin analogues accounting for

38.5% of revenues, according to data from Sanofi. The remaining 61.5% of revenues stemmed

from human and animal insulin therapies, we believe. Novo Nordisk is the market leader in terms

of recombinant human insulin, with a market share of 75% - that company achieved revenue of

$0.53bn for human insulins there in 2013. Eli Lilly held the second largest share of the human

insulin market in China, with a national market share of 17%, we believe. Local manufacturers are

led by Shanghai Fosun and Tonghua Dongbao, which hold a human insulin submarket share of

around 15%. In terms of insulin analogues, Gan & Lee is the only local developer to have launched

biosimilars thus far and that company holds a national submarket share of 5%, we believe.

5.6.7 Bio-Betters Made in China

The 12th Five-Year Plan places strong emphasis on biologics manufacture and expertise, which will

provide a particular incentive to the biosimilars market in China, visiongain believes. Over the

forecast period, the biosimilars sector will display the highest CAGR within the biologics field

(21.5%, compared to 19.5% for branded biologics, and 13.2% for vaccines). This raises the

question of whether Chinese biologics manufacturers can innovate, improving on the biologic

reference products they are using, and ultimately exporting their products outside the domestic

market. Some Chinese manufacturers have products that could be classed as ‘bio-betters’

(improved versions); for example GeneScience Pharmaceuticals reported that its SciMax

(biosimilar filgrastim) has a superior half-life to its reference product, Amgen’s Neupogen. Some of

the leading companies have moved towards biological innovation, including 3SBio, which is

developing a new monoclonal antibody alongside US-based Epitomics (it has also in-licensed a

new product from Isotechnika Pharma). Beijing SL is also looking to enter the innovative product

market having established a joint venture (Diapin Therapeutics) in the US with researchers from

the University of Michigan. It remains to be seen whether Chinese companies can move beyond

imitation of foreign products in this sector (a theme explored in greater depth in chapter 8).

5.6.8 Overview of Chinese Biosimilar Manufacturers

The important domestic Chinese biosimilar manufacturers and the product line they market can be

seen in Table 5.10. Of the companies listed, Innovent Biologics, Shanghai CP Guojian, Henlius

Biopharmaceuticals, and Zhejiang Huahai Pharmaceutical are developing lucrative biosimilar

monoclonal antibodies to popular target such as: CD20 (rituximab), HER2 (trasuzumab), and TNF-

R (adalimumab). Successful biosimilars for these drugs will be globally significant products.

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Chinese Pharmaceutical Market: Forecasts and Outlooks 2014-2024 Figure 6.6 Chinese Antibacterial Drug Market Forecast ($bn), 2014-2024

6.4.3 Cephalosporins: China’s Antibiotic of Choice

China is the world’s second-largest market for antibiotics, with several classes of these products

sold, including penicillins, fluoroquinolones, macrolides, ² -lactam, and carbapenem antibacterials.

Cephalosporins are the most popular class (Table 6.6 and Figure 6.7). The proportion of

carbapenem use in China is higher than rates globally and in other emerging markets. These drug

are often the last line of defence against infection that have become resistant to other classes of

antibacterial drug. Rising use of carbapenem is linked to increased prevalence of one of the most

dangerous multi-drug resistant bacteria: New Delhi Metallo-beta-lactamase-1 (NDM-1).

Table 6.6 Chinese Antibacterial Drug Market by Drug Class: Market Size ($bn), Market Share (%), 2013

Antibacterial Class Market Size ($bn) Market Share (%)

Cephalosporins 3.36 37.8

Penicillins 1.42 16.0

Fluoroquinolones 1.28 14.4

Macrolides 1.04 11.7

Carbapenems 0.82 9.2

Others 0.98 11.0

Total Market 8.90 100.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Mar

ket

Siz

e ($

bn

)

Year

Source: visiongain 2014

Source: visiongain 2014

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Chinese Pharmaceutical Market: Forecasts and Outlooks 2014-2024

mass. Smoking, another risk factor for hypertension, is hugely prevalent in China, with 50% of men

estimated to be current smokers. Advancing population age will also increase the overall

prevalence of hypertension over the next ten years as prevalence is highly correlated with age. We

have modelled a marginal decrease in smoking rates into our forecast, but the underlying trends

push towards increased risk of hypertension across the entire population.

We forecast a prevalent population of 263 million adults with high blood pressure in 2018, rising to

302.9 million in 2024. Diagnosis rates are predicted for a marginal increase owing to improvements

in screening protocols across urban centres and particularly in rural China. Treatment rates for

diagnosed hypertensive cases have improved drastically in recent years. In 2008, as few as 65%

of diagnosed patients went onto to receive medical treatment by 2012, that figure rose to 77%. We

model a continued rise to 88% in 2018 and 92% in 2024. In total, we predict the available

population of treated hypertensive cases at 111.5 million in 2018 (Figure 6.14) and 155.7 million in

2024 (Figure 6.15).

Figure 6.14 Patient Flow Models for The Hypertension Market in China: Prevalent Patients (millions), Diagnosed Cases (millions), Treated Cases (millions), 2018

263.0

126.8 111.5

0

50

100

150

200

250

300

Prevalent Population Diagnosed Cases Treated Cases

Pat

ien

t P

op

ula

tio

n (

mill

ion

s)

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Source: visiongain 2014