Viagra in China: a Prolonged Battle over

CASE ANALYSIS

VIAGRA IN CHINA: A PROLONGED BATTLE OVER

INTELLECTUAL PROPERTY RIGHTS

China is huge. Moreover, it is growing. The Chinese pharmaceutical market is no exception to the enormity and expansion of the country. Boasting one of the largest pharmaceutical markets—and one of the most rapidly growing—China is something that cannot be ignored. Unfortunately, China has several problems that make its market very difficult for many international pharmaceutical companies to tap into and successfully generate sales. This was seen very clearly with Pfizer and the introduction of Viagra into the Chinese market.

In this analysis, several issues will be discussed to determine why Pfizer failed to generate blockbuster sales in China, despite a huge market and strong customer demand for erectile dysfunction drugs. Pfizer’s successes will also be discussed, along with some alternative market strategies that Pfizer could have pursued.

Counterfeits: The Principal Issue

“Gao Jingde, acclaimed by the Chinese media as China’s foremost leader in the fight against counterfeit and substandard medicine, claims that his own studies since 2004 have revealed that two-thirds of Chinese drugstores sell counterfeit medicine.”

Soon after Pfizer launched Viagra in the US and Europe, locally produced counterfeits in China were flooding the market. It is stated in the case that, “high gross profit margin made counterfeiting an attractive business.” It is also claimed that, “In 2004, around 70-80% of erectile dysfunction drugs consumed in China were counterfeits, and a conservative estimate of the market for counterfeit Viagra in the country was over US$240 million, while Viagra’s revenue in China was estimated at a mere $US 12.1 million that year.”

It is not difficult to see what the principal issue is with pharmaceutical sales in China. If a conservative estimate has a legitimate drug getting around 5% of the sales the counterfeit drugs are getting, there is clearly a...