Why TCM?

International consulting firm McKinsey & Co estimates that the size of China's TCM market reached $13 billion in 2011. It defined the market as herbal medicines formulated according to traditional Chinese philosophy.

According to a McKinsey survey, 52 percent of the respondents regard TCM as "more trustworthy" than Western treatments, and 82 percent believe TCM therapies have fewer side effects. Almost half of the respondents said they prefer TCM because of the "long-term effects on health and adjusting body holistically". The survey covered more than 1,000 Chinese people.

In the international market, thanks to the interest in pursuing a healthy and natural lifestyle, demands for herbal medicine are increasing.

The China Association of Traditional Chinese Medicine said the TCM industry output was worth $55 billion in 2011 and is expected to hit $88 billion by 2017, with an annual growth rate of 12 percent.

Recognizing the popularity of TCM, the Chinese government is actively promoting its use as part of recent healthcare reform. In addition to requiring all community health centers to establish TCM departments, the government mandates greater inclusion of and higher reimbursement rates for TCM in its new rural medical reform scheme. Furthermore, it has increased the number of TCM products on the national reimbursement drug list to 307 by the end of last year, accounting for one-third of the list.

"The Chinese government's support for TCM development also encourages foreign companies to join hands with Chinese counterparts," said Liu from Roland Berger. Over the last three years, the government has invested $2.7 billion in TCM clinical research centers and hospital infrastructure upgrades.

The TCM market in China is still highly fragmented. There are about 1,000 local companies, but only a handful - such as China Resources Sanjiu Medical and Pharmaceuticals Co Ltd, Tianjin Tasly Group and Beijing Tongrentang Group - boast annual revenue of more than $200 million. Foreign businesses can invest via merger or acquisition of small businesses.

Sino-foreign partnerships are expected to make market registration easier in both Chinese and foreign markets. Due to their local knowledge, Chinese companies can help foreign partners take full advantage of their resources to promote simultaneous commercialization and marketing of new products they jointly develop.

On another level, the newly kindled interest in TCM may also be attributed to the R&D bottlenecks confronted by most global pharmaceutical majors. "In recent years, the global pharmaceutical industry has seen fast-rising R&D costs yet declining R&D productivity and a longer time to market," Liu said.

On average, only about 20 new drugs get approval from US Food and Drug Administration annually, many of them for rare diseases. Few blockbuster drugs - medicines or medications can be loosely defined as any chemical substance intended for use in the medical diagnosis, cure treatment or prevention of disease - have been discovered in the past decade.

International pharmaceutical companies are desperate for breakthroughs to find new treatments for diseases heavily affecting people's lives and living quality, such as hyperlipemia and hypertension. They have found that TCM is effective in dealing with chronic diseases.

Some foreign firms have already tasted success with TCM.

Novartis, for example, worked closely with partners in China to use artemisinine, a TCM extract, to make malaria vaccine which is used around the world.

Although foreign companies attach great attention to TCM development, it's not an easy way to go.

Related:

What is TCM?