Getting medicine right for long-term growth

Zhejiang Medicine Co Ltd, which exports benflumelol, an antimalarial drug, to global drug pharma major Novartis AG, said it will enjoy higher export rebates of about 17 percent, compared with 13 percent now.

"The higher rebate will boost the company's plan to explore new clients and markets," said a top company official, on condition of anonymity.

Li Kun, chairman of Shenzhen Oriental Pharma Co, whose main product is Phenylephrine HCL, used in the manufacture of decongestants, said following the tax rebates, his company will save costs of about 1.5 million yuan ($240,000) and the same would be used to expand production.

"We have already identified land in Shandong province to build a new facility for our raw material needs," he said.

That marks a sharp contrast from a few months ago, when the company was planning to raise funds from external sources to fund its expansion plans, Li said, adding that the company did not get any export rebate earlier because of Customs' classification issues.

Shenzhen Oriental Pharma, which has a 25 percent global market share through exports of about 20 metic tons of Phenylephrine HCL every year, was facing rough times as its competitors were cutting prices frequently. "The export rebate is a godsend for us as we can now offer competitive prices," Li said.

However, there have also been some concerns among industry experts whether the new measures would lead to monopoly dumping.

Li from Oriental Pharma, however, begs to differ. "Our prices will still be higher than our competitors in India. But we hope to make inroads with our better quality products," Li said.

The export rebates will have a limited impact on product prices, as it will not be enough to offset the losses from renminbi appreciation, said Tan Shengcai, deputy secretary-general of the chamber.

Tan said the increased export rebate will just balance the enterprises' rising costs as other countries, such as India, also provide high export rebates to medicine manufacturers. On the other hand, the adjustment shows the government's keenness to support the entire domestic medical product industry rather than giving such benefits to some companies, as only a few China-made medicine products are exported to global markets, the sources said.