US medical-products maker Baxter International Inc is as profitable in China as in the rest of the world, but the market has become Asia's main battleground for pricing, an executive said yesterday.
Pressure from regulators to make medical treatment more affordable and global initiatives to provide health care to more Chinese are eroding margins, said Baxter Asia Pacific President Gerald Lema.
"Margins in China are pretty similar to world-wide margins," Lema said. "But that doesn't mean that you don't have margin pressure all the time."
Baxter, which aims to at least double sales in China to more than US$200 million by 2010, reported a group gross margin of 43.6 percent in the first half of 2006, up from 40.4 percent a year earlier. Lema declined to give a margin forecast for the Asia business.
"Our growth is not coming from high prices. Our growth comes from being able to access a greater amount of Chinese patients," he said.
Baxter, which makes kidney-dialysis equipment used in hospitals and at home, aims to grow about 25 percent a year in China over the next five years.
The country's booming market prompted the firm to move its Asia headquarters to Shanghai this year, and the Colombia-born regional president has still to relocate from Tokyo.
But the China business is still relatively small, only accounting for a tenth of sales in the Asia-Pacific region including Japan, which in turn makes up 13 percent of global sales.
Baxter generates most of its sales in the country from medication delivery products, such as intravenous systems used in antibiotic therapy. Beijing slashed an average 30 percent off retail prices on 99 kinds of antibiotics on Tuesday.
Source: Shanghai Daily