China’s pharmaceutical sector is growing rapidly, driven in large part by surging exports. But as Economic Information Daily reports, shrinking profit margins are likely to lead to a major industry restructuring.China’s pharmaceutical sector is facing slumping profit margins even as sales revenues and exports of drugs and health supplements grow, a recently published report by the National Development and Reform Commission (NDRC) shows. According to industry analysts, reductions in government-set drug prices and a new prescription management policy is likely to slash margins further, and a restructuring of the industry is necessary to halt the slide.China broadly divides its pharmaceutical sector into chemical drugs, chemical agents, pharmaceutical supplies, pharmaceutical equipment, traditional Chinese medicine and veterinary medicine. These sectors all posted growing sales revenues in 2006, with pharmaceutical supplies and equipment industries leading the charge with 51.39% and 26.37% year-on-year growth, respectively.“The pharmaceutical equipment industry is definitely a new profit growth for the pharmaceutical sector,” China Association for Medical Devices Industry (CAMDI) chairman Jiang Feng said. “With the increasing use of medical equipment in mainland medical institutions and increased attention on China’s healthcare needs, there will be strong growth in demand for both medical devices and household medical devices. Now that China’s pharmaceutical sector has started to open, the medical devices industry is also hoping to attract more foreign investors.”The boost from exportsChina’s exports of medicine and health supplements grew 26.3% year-on-year in 2006 to US$19.61 billion. Exports of traditional Chinese medicine breached the US$1 billion mark for the first time at US$1.09 billion.“Even as

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