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Shuli Ren

Selling Drugs Is No Longer a Free Lunch in China

The days of fat margins and easy money are over as the government gets serious about bringing down costs.

It's time for pharma firms to sing for their supper.

It's time for pharma firms to sing for their supper.

Photographer: Qilai Shen/Bloomberg
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There may be such a thing as a free lunch in China’s pharmaceutical industry. It turns out it’s not an unlimited buffet, though.

For years, the country’s largest drugmakers have happily sold low-cost generic medicines yielding gross margins of 80 percent to 90 percent without giving much thought to consumer protection or innovation. It’s not uncommon for pharma companies to spend one-third of their revenue on sales and marketing, while shelling out peanuts on research and development of new drugs.