Medical reforms spell out profit for pharma giants

Bristol-Myers is focusing on diabetes, hepatitis, tumors and cardiovascular diseases in China, which all fall under the chronic and serious illness umbrella.

"For rare diseases, multinational companies have their unique products, such as Bayer HealthCare's medicine for hemophilia.

"And in the chronic disease sector, their medications and devices are more diversified and innovative," said Guo Fanli, an analyst from domestic research company China Investment Consulting.

But multinational companies still face one significant challenge - how to lower prices, which is also one of the most crucial goals the Chinese government hopes to achieve in the coming years.

Lam said that localization is one solution.

"Localization of insulin and injection device production will help us save cost and then reduce price of Lantus," he said.

However, Pointeau from Bristol-Myers insisted his company's prices remain reasonable, given its 10 years of R&D investment, estimated at $1 billion.

"The daily spending required to use Onglyza is about 10 yuan ($1.6). If it enters the reimbursement list, the price should drop 5 to 10 percent each two years - do you think that's expensive?" he said.

Boston's Mahoney said its new R&D center in China is designed to develop new products and solutions with high cost-performance ratios.

Those with "high quality and affordability" are expected to emerge from its R&D center, and they will then be used around the world, he said.

To reduce R&D and distribution costs and expand market access, foreigners are actively seeking cooperation with Chinese companies, said Guo.

Bristol-Myers follows a "selective integration" strategy, when partnering with local companies.

It has cooperation agreements with Zhejiang-based Simcere Pharmaceutical Group on development and commercialization of cancer therapy, and with Wuxi PharmaTec Co Ltd on lab and data research.

Medtronic Inc, the founder and the world's largest producer of pacemakers, based in Minneapolis in the US, has announced two merger and acquisition deals with Chinese companies that have created trading volumes worth nearly $900 million.

It acquired China Kanghui Holdings, a Jiangsu-based orthopedic devices manufacturer, for $816 million.

It also spent nearly $66 million buying Shenzhen-based LifeTech Scientific Corp, which is engaged in developing, producing and marketing treatments for cardiovascular disorders.

The world's largest drugmaker by sales Pfizer Inc and Zhejiang Hisun Pharmaceuticals set up a $295 million joint venture last September, which focuses on the development, manufacture and commercialization of off-patent products.

All of these companies have underlined their plans to continue looking for M&A and cooperation opportunities in China.

"So far, the government's policies are positive news to healthcare companies," said Li Qiushi, an analyst at Guotai Junan Securities.

He said international companies with long-term vision will be the ones which succeed.