Risks Outweigh the Benefits for Actavis in China

Published on Author tamayoa16

According to Benjamin Schobert, a writer for Forbes, the pharmaceutical company Actavis has decided to pull out its investments in China. This comes as a surprise, since the growing pharmaceutical market in China would suit Actavis’ investments. So why did they decide to pull out of China?


It is addressed that there are possibly two ideas behind the reasoning for Actavis’ decision. First, it could have been a statement in regards to China’s diminishing hospitality towards foreign businesses in general. Secondly, it could have been that Actavis was not in a favorable position for their business to grow in China. The idea that Actavis could not have been profitable in China raises another question: Is there a demand for healthcare goods and services in China? The short answer is yes, but the main concern is whether or not foreign companies can seize the opportunity while still making a sizable profit.


What is holding companies like Actavis and GSK back from making a profit in China? Both companies have come to realize that the government is their biggest customer and also their biggest obstacle. Healthcare in China has become an increasingly political matter and the government is responsible for the funding mechanism that has made the availability and affordability of healthcare for the average Chinese citizen unattainable. Fully understanding the healthcare situation in China, it can be seen why Actavis has begun to pull out of China.


Further Reading

5 Responses to Risks Outweigh the Benefits for Actavis in China

  1. In all of these posts about barriers to entry in China, companies pulling out or refusing to enter the Chinese market, etc., it always seems to be the case that the main problem is the Chinese government. I wonder if China will ever open up its borders to immerse itself in a more globalized market in the near future? Its hesitancy is understandable, I suppose, as it itself is a big enough market for essentially any nation. It seems that serious political change will have to precede any grand opening up of the Chinese market in any case, though.

  2. Hypothetically speaking, if the reason for Actavis’ pulling out of China is that their government was not being ‘hospitable’, then some pessimists might speculate that history is repeating itself. Throughout history, China has been known to have been a civilization that was brilliant in mathematics and ingenuity, but purposefully alienated itself from the outside world. This prevented them from access to new ideas that were borne outside of their borders and can be blamed for limiting their full potential as a country. In also considering their slowing economy, if China continues to push businesses out, they could experience major economic decline.

    • Be careful about broad-sweep statements: it is not true that China purposefully alienated itself across its broad history – or that “China” in (say) 1 AD has anything in common with the People’s Republic except that they occupy the same geography and that modern Chinese is linguistically derivative from classical Chinese.

  3. What specific pharmaceuticals was Actavis attempting to market? These sorts of discussions need to be made concrete. If their primary products are ones for which close substitutes are available, then it may be a pricing policy that discourages doctors and hospitals to use their (potentially superior) drugs.
    We also have to realize that the US is highly unusual as a market for pharma. We have a patent system that was influenced by the industry, and varies from those elsewhere. We also have prices far, far higher than elsewhere due to our lack of a healthcare system [the US has healthcare, but “system” is problematic]. It is perfectly understandable that other countries are reluctant to import our practices and our prices.
    Look for articles on clinical trials in China. The technical skills available there may make entry attractive as a cost-effective alternative to running drug trials in the US or Europe or Japan, plus the sheer size of the population provides a larger potential patient base for diseases that are uncommon.

  4. Remember, pharmaceutical companies face very big business incentives in the form of patents on their drugs and subsidy of their research. How do these considerations tie into Actavis’s decision? Pharma also have specialized ties to regulatory agencies–e.g. they pay speaking engagements for FDA officials and the “scientists” who lead the studies seeking drug approval. In a centralized economy like China’s, considerations like these play a big part in the business’s ability to develop, monopolize, and market drugs to consumers.