Multinational pharmaceutical companies (MNCs) operating in China’s vaccine market face growing challenges as regulatory scrutiny, intensifying domestic competition, and shifting consumer behaviours disrupt what was once a booming sector.
For years, China has been a major growth driver for premium, privately paid vaccines, with international players such as MSD and GSK capitalising on strong demand from the country’s expanding middle class. However, several different events culminated in an abrupt reversal in fortunes last year. GSK’s restructuring of its distribution deal for its shingles vaccine Shingrix in December 2024, and MSD’s decision to pause sales of its blockbuster human papillomavirus (HPV) vaccine Gardasil until mid-2025, signal mounting pressures.
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A combination of factors have led to a significant drop in vaccine sales, including China’s sweeping anti-corruption crackdown on the healthcare sector, price competition from domestic manufacturers, and a cooling economic environment. In response, foreign vaccine makers are being forced to rethink their strategies in a market where regulatory unpredictability and a nation’s self-sufficiency ambitions are increasingly shaping the competitive landscape.
“With the large volumes and prices at a fraction of those of multinational products, domestic vaccine companies have completely changed the competitive situation,” says Justin Wang, a consultant at L.E.K. Consulting based in Shanghai, China. “It will be very challenging for MNCs to compete on the current price premium in a severe ‘oversupply’ situation,” he adds.
Declining sales
In its Q2 2024 earnings, MSD announced that sales for Gardasil were 17% lower (18% in exchange) compared to the previous year. At the time, the company attributed this to broader market headwinds rather than company-specific issues, citing price competition from local manufacturers and China’s ongoing anti-corruption crackdown on both hospitals and the health sector. MSD also said it would pause Gardasil sales in China until at least mid-2025.
Another reason that was mentioned was weak discretionary spending. Because Gardasil is not part of China’s national immunisation programme, consumers must pay out of pocket to receive the vaccine.
GSK has also felt the impact. In December 2024, GSK’s Chinese distribution deal for Shingrix with Chongqing Zhifei Biological Products was significantly restructured. Originally, Zhifei had committed to purchasing at least CN¥20.6 bn ($2.83bn) worth of Shingrix between 2024 and 2026. However, in December 2024, the companies extended the contract to 11 years, but reduced annual volumes, with Zhifei now set to purchase CN¥21.6 bn ($2.97bn) worth of the vaccine over six years.
At the time of the revised agreement, GSK’s chief commercial officer Luke Miels released a statement saying, “This revised agreement with Zhifei puts our collaboration on a sustainable footing, managing challenges in the macro environment in the near-term.”
The anti-corruption crackdown
China’s anti-corruption campaign, which targets bribery in hospitals and pharmaceutical procurement, has led to more stringent regulations and increased scrutiny on foreign companies.
AstraZeneca was directly affected when a former top executive in China, Leon Wang, was arrested in October 2024 in connection with the alleged illegal importation and sale of certain cancer drugs. In Q4 2024, AstraZeneca’s China sales fell 3%, which the company attributed to a mild winter and annual budget caps at Chinese hospitals.
Chia Hsuan Lin, a GlobalData analyst, says that from a broader scope, the anti-corruption campaign has a negative impact on pharma sales. “As concerns about the campaign were raised, hospital procurement and scientific communication between companies and hospitals may have been slowed down,” Lin says.
However, John Tan, a partner at law firm Arnold & Porter in Shanghai, China, argues the campaign is not specifically targeting MNCs. “Companies should not make more of the [anti-corruption] campaign than there is. It’s a desire to eliminate corruption. And I think that is a commendable goal, and a goal that is shared by regulators worldwide,” Tan says.
Ruby Wang, managing director of consultancy LINTRIS Health, United Kingdom, notes that corruption in China’s healthcare sector has long been an issue, particularly in the vaccine space. “There have been vaccine scandals for years—out-of-date vaccines, poor quality vaccines being delivered to the Chinese population,” says Ruby Wang. “I think the Chinese population do have an issue with mistrust,” she adds.
Rising domestic competition and price pressure
Alongside regulatory hurdles, foreign vaccine manufacturers are facing increasing competition from Chinese firms that offer high-volume, lower-cost alternatives. Companies such as Wantai Biopharm and Jilin, China-based Changchun BCHT Biotechnology have developed their own HPV and shingles vaccines, challenging the premium pricing strategies of MSD and GSK.
“With the large volumes and prices at a fraction of those of the multinational products, domestic vaccine companies have completely changed the competitive landscape. It will be very challenging for MNCs to compete at the current price premium in an oversupplied market,” says Justin Wang.
“China really prioritises its domestic market. The foreign actors have good quality vaccines and drugs, but it’s increasingly difficult to maintain good channels of influence with government, and good relationships. China’s priority, like any country, is to boost its domestic capability, domestic market, and to make sure domestic pharma companies and vaccine developers win,” says Ruby Wang.
Changing consumer behaviour
Market dynamics have also shifted due to changing consumer behaviour. Justin Wang believes that the initial surge in demand for vaccines like Gardasil was driven by a perceived shortage and pent-up consumer interest. Now, with stable supply and more affordable alternatives, demand is normalising.
“Before MSD launched its HPV vaccines in China, there was already a piled-up demand from their target customers—young, professional women who cared about their health and were willing to pay out-of-pocket. Now, after these years, this ‘stocked demand’ seems to have been depleted, and uptake is returning to normal,” Justin Wang says. “The market size is inevitably going off a cliff,” he adds.
However, Ruby Wang offers a different perspective, arguing that factors beyond market forces are at play. “Cervical cancer and HPV are very unique and carry so much stigma, not only in China, but around the world,” she says. She explains that the association between sexual behaviours, young women, and China’s traditional society may impact vaccine uptake, especially in more rural areas of China.
She also notes that while some provinces are piloting free HPV vaccination programmes, uptake remains low due to social barriers.
Justin Wang adds that various local governments have included or are working to include HPV vaccines in their free vaccination programme, showing a strong level of government awareness of this health issue and willingness to drive vaccination. In turn, this will impact the share of self-paid products, he adds.
Beyond HPV vaccines, Miels said that China’s broader economic slowdown is also affecting consumer spending on discretionary healthcare products, including vaccines that are not covered by the national immunisation programme. “A broader slowdown in the economy definitely impacts the market and just the capacity of local governments to then restock and purchase vaccines, which are then subsequently purchased by individuals,” Miels said in GSK’s Q3 2024 earnings call.
The future of China’s vaccine market
Looking ahead, the challenges facing vaccine MNCs in China are unlikely to ease soon. The combination of heightened regulatory enforcement, stronger domestic competition, and changing consumer dynamics is reshaping the market.
Ruby Wang emphasises the importance of building government relations, not just for influence, but also for gaining early insights into regulatory changes. “[In China], these rules and regulations are often announced unexpectedly, and companies have to scramble to work out what it means…you can only get that insight through good relationships and keeping close comms,” she says.
Tan adds that the anti-corruption campaign, which was originally intended as a one-year effort, now appears to be a long-term shift. “This may simply be the new normal,” says Tan.
As China prioritises the growth of its domestic pharmaceutical industry, foreign vaccine manufacturers will need to adapt their strategies to navigate an increasingly complex and competitive market.
