Merck Invests $107M in China Drug Plant

German drugmaker Merck KGaA has invested 80 million euros ($107.67 million) in a manufacturing plant in China, the company said on Friday, underlining the importance of the market for global drug firms.

The Shanghai-based facility will come online in 2017, producing drugs to treat China's fast growing number of diabetics as well as cardiovascular and thyroid disorders, Merck's biopharmaceutical unit said.

Spending in the country's healthcare sector is forecast to nearly triple to $1 trillion by 2020 from $357 billion in 2011, according to McKinsey, which has prompted many firms to invest in Chinese facilities and set up joint-ventures with local companies.

The investment comes as international drug companies have come under pressure in China this year with authorities clamping down on the high price premiums many of them enjoy and a number of drugmakers have been caught up in corruption allegations.

British drugmaker GlaxoSmithKline is under investigation over allegations it funneled up to 3 billion yuan ($492.43 million) to travel agencies to facilitate bribes to doctors and officials to boost its drug sales.

Large international drugmakers Novartis AG, AstraZeneca Plc, Sanofi, Eli Lilly & Co and Bayer AG have also been questioned by Chinese officials this year.

Drugmakers have seen their sales suffer in the wake of the probes, with many Chinese doctors refusing to see drug representatives for fear of being caught up in the widening scandal.

GSK's third-quarter China sales fell 61 percent, while Sanofi lowered its 2013 profit guidance on China weakness.

Industry insiders said that despite any roadbumps, international drug firms would be unlikely to turn their back on China, which is set to be the second-biggest drugs market behind the United States by 2016, according to IMS Health.

"In 10 years it's conceivable that China will become the largest pharmaceutical market in the world," said Benjamin Bai, Shanghai-based partner at law firm Allen & Overy. "Do you think (drug firms) can afford to get out of China? No, even if it's difficult, they will find a way to adapt."

($1 = 6.0922 Chinese yuan)

($1 = 0.7430 euros)