Pharmaceutical industry in China | Wikipedia audio article


The pharmaceutical industry is one of the
leading industries in the People’s Republic of China, covering synthetic chemicals and
drugs, prepared Chinese medicines, medical devices, apparatus and instruments, hygiene
materials, packing materials, and pharmaceutical machinery.
China accounts for 20% of the world’s population but only 1.5% of the global drug market. China’s
changing health-care environment is designed to extend basic health insurance to a larger
portion of the population and give individuals greater access to products and services. Following
the period of change, the pharmaceutical industry is expected to continue its expansion.China,
as of 2007, has around 3,000 to 6,000 domestic pharmaceutical manufacturers and around 14,000
domestic pharmaceutical distributors. The most often-cited adverse factors in the marketplace
include a lack of protection of intellectual property rights, a lack of visibility for
drug approval procedures, a lack of effective governmental oversight, poor corporate support
for drug research, and differences in the treatment in China that are accorded to local
and foreign firms. Nevertheless, China is reportedly expected to become the third-largest
pharmaceuticals market in the world by 2021.Research and development are increasing, with Shanghai
becoming one of the most important global drug research centers. Most notably, Novartis
is expected to establish a large Research and development base in Shanghai that will
be a pillar of its drug development.China’s thousands of domestic companies account for
70% of the market, the top 10 companies about 20%, according to Business China. In contrast,
the top 10 companies in most developed countries control about half the market. Since June
30, 2004, the State Food and Drug Administration (SFDA) has been closing down manufacturers
that do not meet the new GMP standards. Foreign players account for 10% to 20% of overall
sales, depending on the types of medicines and ventures included in the count. However,
sales at the top-tier Chinese companies are growing faster than at Western ones.==Future growth==
China is the world’s second-largest prescription drug market, according to a report released
by pharmaceutical market research firm IMS Health. The report said that China’s pharmaceutical
revenue is growing fast and that the market there may double by 2013. Sales of prescription
drugs in China will grow by US$40 billion through 2013, the report said. The value-added
output of China’s pharmaceutical industry increased 14.9% year on year in 2009, according
to statistics released by the Ministry of Industry and Information Technology. In the
first 11 months of last year, the medicine sector’s combined net profit was RMB 89.6
billion, up 25.9% year on year. Growth in the period was only 16.2% in the period from
January to August.==Overview==
China has established a pharmaceutical industry structure, and has become one of the largest
pharmaceutical producers in the world. The Chinese pharmaceutical industry has been growing
at an average annual rate of 16.72% over the last few decades. However, the industry is
still small-scale with a scattered geographical layout, duplicated production processes, and
outdated manufacturing technology and management structures. The Chinese pharmaceutical industry
also has a low market concentration and weak international trading competitiveness, coupled
with a lack of patented domestically-developed pharmaceuticals. (Barnet Siu; 2010)
Investment conditions in China have improved due to the vast consumer demand for pharmaceuticals,
the lower labor costs and the changes resulting from economic reform. Changes to the patenting
laws in full compliance with the requirement of the Agreement on Trade-Related Aspects
of Intellectual Property Rights (or “TRIPS Agreement”) and the lack of Chinese pharmaceutical
R&D have also left gaps in the market. The domestic pharmaceutical industry has been
a key contributor to the country’s impressive economic growth. As one of the world’s major
producers of pharmaceuticals, the sector achieved an annual compound growth rate of 16.7% between
1978 and 2003. Both far outpaced other economies in the world, making China the world’s fastest
growing pharmaceutical market. Although China has enjoyed the benefits of an expansive market
for pharmaceutical production and distribution, the industry is suffering from minimal innovation
and investment in R&D and new product development. The sector’s economies of scale have yet to
be achieved. Most domestic manufacturers in the pharmaceutical industry lack the autonomic
intellectual property and financial resources to develop their own brand products. Most
manufacturers rely on the repetitive production of low value added bulk pharmaceuticals and
imitation drugs.==Quality==
The Quality of drugs and Active Pharmaceutical Ingredients (API) made by Chinese pharmaceutical
companies is often poor. Quality is often poor, for example has Europe
banned some APIs from Chinese drugmaker Zhuhai United where they found issues with aseptic
manufacturing facilities and Huzhou Sunflower Pharmaceutical’s plant in Huzhou, Zhejiang
Province, where French regulators turned up contamination issues in its manufacturing
processes, see Europe bans some APIs from Chinese drugmaker Zhuhai United
June 22, 2015 By Eric Palmer http://www.fiercepharmamanufacturing.com/story/europe-bans-some-apis-chinese-drugmaker-zhuhai-united/2015-06-22 In the past three years 2015-2017, there were
35 FDA warning letters to Chinese pharmaceutical companies citing serious Data Integrity issues,
including data deletion or manipulation or fabrication of test results, see “An Analysis
Of 2017 FDA Warning Letters On Data Integrity” By Barbara Unger, Unger Consulting Inc.
https://www.pharmaceuticalonline.com/doc/an-analysis-of-fda-warning-letters-on-data-integrity-0003 See the long list of Chinese pharmaceutical
companies which have been placed on Import Alert by the FDA due to serious noncompliance
with Good Manufacturing Procedures http://www.accessdata.fda.gov/cms_ia/importalert_189.html See the European Medicines Agency EudaGMDP
Noncompliance Reports based on Inspections of companies that revealed serious noncompliance
with Good Manufacturing Procedures: http://eudragmdp.ema.europa.eu/inspections/gmpc/searchGMPNonCompliance.do See FDA Warning Letters detailing serious
noncompliance with Good Manufacturing Procedures: http://www.fda.gov/iceci/enforcementactions/WarningLetters/default.htm==Structure and trends==
Currently China has about 3,500 drug companies, falling from more than 5,000 in 2004, according
to government figures. The number is expected to drop further. The domestic companies compete
in the $10 billion market without a dominant leader. As of 2007, China is the world’s ninth
drug market, and in 2008 it will become the eighth largest market.
China’s thousands of domestic companies account for 70 percent of the market, and the top
10 companies about 20 percent, according to Business China. In contrast, the top 10 companies
in most developed countries control about half the market. Since June 30, 2004, the
State Food and Drug Administration (SFDA) has been closing down manufacturers that do
not meet the new GMP standards. Foreign players account for 10% to 20% of overall sales, depending
on the types of medicines and ventures included in the count. But sales at the top-tier Chinese
companies are growing faster than at Western ones, according to IMS Health Inc.Even the
top selling companies just barely exceed sales of $100 million (hospital market). Most of
the Chinese drug-makers fall below the 20th ranking, but 30 of the top 50 companies are
local.In addition, China’s over-the-counter market is growing fast and has become the
fourth largest OTC market in the world. Foreign enterprises have been closely monitoring the
expanding OTC market. Merck announced the launch of OTC program in China in September
2003. Roche listed China as one of its 10 core OTC markets, with the aim of growing
its OTC drug sales by 50% in the next five years and reaching 1.3 billion in 2008. Novartis
is expanding its OTC market share in China, and Wyeth has also entered OTC market.
The pharmaceutical market in China is dominated by its non-branded generic industry that operates
with basic technology and simple production methods. Domestic pharmaceuticals are not
as technologically advanced as western products, but nonetheless occupy approximately 70% of
the market in China. Domestic companies are mainly government owned and fraught with overproduction
and losses. The Chinese government has begun consolidating and upgrading the industry in
an effort to compete with foreign corporations. It is estimated that most hospitals derive
25-60% of their revenue from prescription sales, hospitals remain the main outlets for
distributing pharmaceuticals in China. This will change with the separation of hospital
pharmacies from healthcare services and with the growing numbers of retail pharmacy outlets.
Retail pharmacy outlets are expected to grow in number once the government finally introduces
its system to classify drugs as OTC. The government is now encouraging development of chain drug
stores, but the full effect might not be seen for several years.
The price of pharmaceutical products will continue to decrease steadily. In June 2004,
the price of 400 antibiotics in 24 categories, including penicillin, was reduced by, on average,
35%. The total value affected by this reduction was US$42 million. The central government
has been playing a significant role in pharmaceutical price readjustment. The government compelled
and continually 32 times reduced the price of most of the drugs in last 20 years since
2016. Future price reductions will originate from hospital pharmaceutical retail shops.
The rural pharmaceutical market will shift significantly. 80% of counterfeit products
are consumed in rural areas. This provides a huge opportunity for pharmaceutical companies
to develop the market in rural areas. In 2005, Huanan Pharmaceutical Group, Guangzhou Ruobei
Huale, Baiyunshan Pharmaceutical Group, and others, have stepped up efforts in targeting
the rural market.The China Pharmaceutical Equipment Industry 2015 Market Research Report
is a professional and in-depth study on the current state of the Pharmaceutical Equipment
industry.===Historic foreign involvement===
Bayer of Germany, the inventor of aspirin, began trade with China in as early as 1882.
Hoechst AG, known as Aventis, sold its products through 128 distribution agents across China
in 1887, becoming China’s no. 1 Western medicine and dyeing provider. Eli Lilly and Company
opened its first overseas representative office in Shanghai in 1918. ICI, the predecessor
of the world’s no. 3 pharmaceutical enterprise AstraZeneca, began trade with China in 1898.===Production levels===
In the 9 months from January to September 2004, the total output of the country’s pharmaceutical
industry reached $40 billion, 15.8% higher than the same period of 2003. In the same
period, 23 major state-owned pharmaceutical companies had sales of $10 billion. A survey
of 16 typical city hospitals, the usage of drugs increased by 32.23% in the first half
of 2004 as compared with that of 2003. Around 36% of all China’s pharmaceutical enterprises
are state-owned. Another 35% are privately owned domestic enterprises and the remaining
29%, foreign-funded. Synthetic drug manufacturing remains the pharmaceutical industry’s largest
business in China, constituting 65% of industry sales. Another 21% of industry sales come
from traditional Chinese medicine. Biotech-related medical products and medical equipment make
up the rest.====Regional distribution====
China’s huge and gradually aging population and strong biopharmaceutical sector have almost
guaranteed a large but varied pharmaceutical market profile. Zhejiang, Guangdong, Shanghai,
Jiangsu and Hebei provinces have always been among the top five most productive provinces
in China. Each of these provinces has grown steadily by an average of 20 per cent per
annum from 1998 to 2003 (with the exception of Jiangsu in 1998 and 1999) and reflects
an increasingly healthy developing trend in the Chinese pharmaceutical industry.
Most pharmaceutical firms are located in the southeastern zone that includes two well-developed
areas and three under-developed areas. The two most popular areas of well-developed pharmaceutical
industry, called the growth poles, are the Eastern China zone of which Zhejiang province
is located in the centre and the South China zone represented by the Guangdong province.
The total output value of these two provinces accounted for 21 per cent of the total output
value of pharmaceutical industry of China in 2003.
The three sub-developed areas of pharmaceutical industry, called the potential points, are
also identified as the Middle China Zone, the Northeastern Zone and the Southwestern
Zone, centralised in Hebei Province, Heilongjiang province and Sichuan province, respectively.
The development of the pharmaceutical industry in China was found to be predominantly driven
by economic factors. The nature of an industrial region can roughly fall into one of the following
three types: natural resource-driven region, economy-driven region and science and technology-driven
region. The pharmaceutical industry in China grows well only in areas with a strong macroeconomic
background rather than in regions with rich natural resources or advanced science and
technology. Moreover, it is shown that the stronger the macro-economy, the faster the
pharmaceutical industry grows. Therefore, the decision-making policy on pharmaceutical
development in a region should be largely based on its macroeconomic situation.
Broadly speaking, it appears that the dynamic features of the pharmaceutical industry in
China remain steady. According to the reform plan, China will conduct a regime of vertical
management in drug supervision and management departments, intensify supervision and control
over medicines, and gradually set up a drug management system featuring legal management,
unified law enforcement, standard codes of conduct, honest practice and high efficiency.
To meet the objective requirements of drug administration and the needs of the development
of medical services, a drug supervision and management body was formed in 1998.
The pharmaceutical industry in China was found to be extensively fragmented. Excessive repetitive
establishment of provincial pharmaceutical industries was found to be serious in comparison
to other industries in China. It also demonstrates a low-level, repetitive development situation
of the pharmaceutical industry in different regions of China.
Currently in China, the pharmaceutical industry is undoubtedly still developing. The most
desirable strategy has been, therefore, to concentrate on the regional pharmaceutical
industries. There are three main reasons for this strategy: high profitability and growth
of the pharmaceutical industry, unnecessary political competition among regions, and excessive
exploitation of regional administrative power. (Hu Yuanjia; 2007)
The pharmaceutical industry is always known as a high-return and rapidly growing industry.
After the Chinese market was reformed, China gradually makes space for a healthy, steady
and rapidly developing pharmaceutical industry, where profit rate and growth rate are much
higher than in other industries. In the view of high profit returns, regional governments
often allow excessive development of regional medicine industries without careful analysis
of regional competitiveness, actual advantages and development strategies to incentivise
the regional development of the entire economy. In China, drug administration departments
are established at both central and regional governmental level. Every region has a regional
drug administration department with some authority and power. Without good communication and
cooperation between administration department, unnecessary competition between regions might
occur. The number of drug companies under each administrative department is often wrongly
recorded resulting in an inaccurate evaluation index of the regional economic development
and governmental performance. Complex regulatory processes induce excessive
exploitation of regional administrative power. Before the revision of Chinese Pharmaceutical
Law in 2001, the province drug administration was assigned with authority to streamline
the process of registering a generic drug. Consequently, this regional authority power
was exploited resulting in excessive duplication of the same drugs. For example, a fluoroquinolone
type medicine was registered and manufactured by more than 1,000 enterprises. Fortunately,
the Chinese government immediately realised the serious problem and withdrew the regional
authority power to prevent overlapping of authorities. Duplication of drug is, however,
not the only example. After the allocation of authority of approval right of opening
drug companies was taken down to provincial level several years ago, a sharp increase
in the number of drug companies was noted. It was reported that 70 new drug production
enterprises were approved to open during the first half of 2003, while only 45 similar
enterprises were approved to open during the three years from 1998 to 2001.===Research and development===
With their low budget for research and development, China’s pharmaceutical makers are in a different
league from the multinationals, but they do enjoy certain advantages. Many Chinese companies
not only produce the dosage forms (such as tablets) but also own the pharmacies where
they are dispensed, as well as the distribution networks that deliver them to the hospitals,
where nearly 80% of drugs are sold. In addition, Chinese companies can produce generic versions
of branded drugs for a fraction of their price. Of the 3,000 pharmaceuticals – not including
traditional medicines – manufactured in China since the 1950s, 99 percent are copies of
foreign products, as are almost 90 percent of China’s biotech products. Most Chinese
companies – even joint ventures – compete with each other for the same generics. Many
are struggling for survival; more than 32 percent recorded losses in 1999, according
to the Pharmaceutical Department of National Development and Reform Commission.
Moreover, compared with international pharma giants, Chinese companies are not only small,
but are weak in technology and often lack capital. The total R&D expenditures for Chinese-owned
pharma businesses amounted to less than that spent by a single major Western pharma company.
There are presently more than 5,000 research and development (R&D) institutions in China,
but only a handful of them are able to compete internationally in certain areas.
The R&D system consists of specialized research institutes, major universities, biotechnology
companies, and R&D divisions of large pharmaceutical enterprises. In recent years, mid- and small-size
biotechnology companies are developing at a rapid pace. There are more than 1,000 such
entities nationwide at present, and more than 30% of them are privately owned. Special governmental
funds are available to promote this type of entrepreneurship.
During the past several years, some Chinese pharmaceutical companies began to establish
R&D infrastructures largely due to internal growth needs, but their primary focus is directed
toward improving existing technologies or developing generic version of new drugs.
Companies to expand research efforts in China include GlaxoSmithKline, Bayer, Bristol-Myers
Squibb, Merck & Co and Eli Lilly & Company.===Comparison of Chinese and Western pharmaceutical
companies===Like its U.S. and European counterparts, the
Chinese pharma business is regulated by government agencies, and competition is fierce in the
business. The biggest differences include following: most Chinese pharma companies are generic
drug manufacturers; a large number are traditional Chinese medicine
manufacturers; hospitals are still the major drug market;
patent issues are the greatest weakness of Chinese producers.When the Chinese are developing
an API they try patent searches via the internet, but are limited by the scope of the available
services. Few factories yet have patent attorneys on staff, but for the larger pharma groups
who are seeking partnerships with large Western firms, this may come soon.The Chinese business
environment is mainly relationship-based, and this is reflected in the pharmaceutical
business. Establishing relationship with a pharma companies through personal connections
is a common way to contact Chinese pharma companies. Attending pharmaceutical exhibitions,
pharmaceutical conferences or seminars is another approach, as is holding a press conference
attended by officials of related government agencies or associations and senior pharmaceutical
executives.===Domestic companies===From 2003 to 2004, the number of pharmacies
climbed to 200,000 from 180,000, and the number of retailers owning chain stores rose from
1200 to 1349. Before the 1980s, the distribution channel
for China’s pharmacy products was vertically integrated, as there were few middlemen for
medicine sales and the only wholesalers were the traditional pharmacy stores. However,
after the 1980s, with the deepening of China’s reforms, the distribution of China’s pharmacy
products have undergone profound changes that have to some extent changed this.
At present, there are three main distribution channels for China’s pharmacy enterprises: Pharmacy enterprises – national general agent
– sub wholesaler – retailers – patientsUnder this distribution form, there is a sole authorized
organization in the country that is responsible for the sale of one or more products of a
pharmacy company. Such kind of distribution also can be called “the national agent mode.”
The pharmacy company is responsible for the manufacturing, research and development of
the products, and the general agent for the nationwide sale of the products of the company.
There are mainly three national distribution agencies in mainland before 2010: Sinopharm
Group, Shanghai Pharma and CR Pharmaceutical. In most cases, the agents buy the pharmacy
products with cash after weighing the costs and profits, and the market risks lie with
the wholesalers. Pharmacy enterprises – regional general agents
(sub wholesalers) — retailers – patientsUnder this mode, the pharmacy enterprise search
for its national or regional general agent and use the agent’s market network to sell
its products. Such kind of distribution mode can be called “the regional general agent
mode.” The pharmacy enterprise usually entrusts its general agent with the sale of its products
through a bidding process or forming alliance with the agent, providing it products at a
bottom price. The agent, after buying a certain amount of products, win the authorization
from the pharmacy company to sell in a specific region and becomes its sole authorized agent
in the region. The regional general agent can be the general wholesaler in a big region,
provincial wholesaler, district wholesaler or municipal wholesaler, etc. In a big region
or in a province, regional general agents provide patients with their products through
sub-wholesalers and retailers. In a small place such as a county, products can go directly
from the regional general agent to retailers and then to patients, without the involvement
of sub wholesalers. Marketing companies of pharmacy enterprises
– local offices of pharmacy companies — retailers – patientsBefore taking such a distribution
channel, the pharmacy enterprise should first register an independent licensed marketing
company, and then set up offices in major cities which are responsible for monitoring
sales and distribution of its products in their respective regions. Such a distribution
mode, which requires large amount of capital and high-level management for the pharmacy
enterprise, is mostly used by large-sized pharmacy enterprises.
In the above-mentioned modes, pharmacy enterprises, middlemen and patients are three basic components.
Middlemen can also be classified under the categories of wholesalers and retailers. Retailers
include those with shops, without shops and retail groups. What needs to be pointed out
is that in China, the biggest pharmacy retailer is the hospital, due to the country’s medicare
and social security mechanisms. In the retail market, 85% of pharmacy products go to patient
through hospitals. Hence, the major distribution channels in
China can also be described as the following: pharmacy enterprises—hospitals-patients;
pharmacy enterprises—wholesalers—hospitals—patients; pharmacy enterprises—agents—wholesalers—retailers—patients;
pharmacy enterprises—retailers—patients.The first two modes are the leading ones in China.
In recent years, China’s pharmacy enterprises have entered two new fields: e-business and
the setting up of pharmacy retailing chain stores. At present, the development of the
B to C mode of pharmacy business in China is limited.
B2B is the main development trend of China’s e-pharmacy commerce. Though the trade volume
of B2B e-pharmacy business only makes up a percentage of the total pharmacy sales, it
still has large development potential. In China’s case, the B2B e-pharmacy commerce
has grown by 300 percent yearly. In 2003, the trade volume of internet pharmacy sales
was estimated to be 10 percent of the total. In addition, more and more IT and other industry
lead companies have been shifting their investments into the pharmaceutical industry. One example
is Fang Zheng Group, an IT company that had invested a total of US$363 million into pharmaceuticals
and healthcare. Guangzhou Bai Yun Shan Pharmaceutical Manufactory earmarked US$12 million to start
an external-use medicine project, which was in addition to its US$48 million antibiotics
project.===Domestic companies doing R&D===
To date, the Chinese domestic pharmaceutical industry has invested very little in the research
and development of new drugs, though the central government is encouraging R&D through investment
and other incentives in an effort to build a world-class pharmaceutical industry. C & O Pharmaceutical Technology Holdings Ltd.
(SIN:COPT) is an integrated pharmaceutical group in China which boasts an extensive distribution
network covering over 3,000 distributors and 300,000 clinics, pharmacies and hospitals
across all parts of China. To expand its portfolio of proprietary drugs, the company is developing
a range of drugs that address acute medical areas such as anti-infection, anti-HBV, anti-cancer,
anti-tuberculosis, anti-aging and anti-obesity. Three potential Category 1 drugs are also
under development: an anti-Hepatitis B drug, a new immuno-enhancer drug and alternative
drug to cancer treatment, and an antibiotics drug which is more effective against a broad
spectrum of bacterial pathogens, especially Gram-positive drug-resistant bacteria. With
80 in-house researchers who have been handpicked for their specialties in different fields,
ranging from chemical synthesis, drug formulation and preparation methods to clinical research,
product registration, manufacturing techniques and pharmaceutical analysis, C&O is one of
the few qualified pharmaceutical companies in China with the expertise to provide contract
research services to the growing number of international pharmaceutical companies seeking
to outsource their R&D activities to China. C&O has been providing contract research and
contract manufacturing services to pharmaceutical companies both in China and outside of China.
Jiangsu Hengrui Medicine Co. Ltd. (SHA: 600276), headquartered in Lianyungang, Jiangsu Province,
is one of the leading pharmaceutical companies in China. Hengrui always values R&D and has
R&D office in Liangyugang since 1994. In 2000 and 2011, Shanghai R&D center and Chengdu
R&D center were established, respectively. Hengrui’s investment in R&D remains high and
consecutively ranks at top positions in China in recent years. Hengrui’s R&D involves oncology,
metabolic disease, cardiovascular disease, inflammation, and diseases in central nervous
system and immune system, etc., and is well known for its innovative anti-cancer drugs.
Apatinib, e.g., which was approved by China FDA (CFDA) in Dec 2014, has been the first
small molecule anti-angiogenesis targeted treatment for advanced gastric cancer in the
world. Hengrui’s R&D activities have expanded overseas – the R&D offices have been set
up in the US, Japan and Australia, and collaborations have been formed with a number of renowned
international pharmaceutical companies and institutes – Incyte, Tasoko and MD Anderson
Cancer Center. Shijiazhuang Pharma Group: Based in Shijiazhuang,
the capital city of Hebei Province in northeast China, the pharma group is one of the largest
pharma industries of China. In November 2004, the group announced the official launch of
its investigative drug butylphthalide (NBP). The group acquired patents of the drug from
Chinese Academy of Medical Sciences for less than $4 million, and spent only $6.3 million
on clinical trials. Shijiazhuang Pharma Group is very typical in the new drug development.
The company uses three ways: first, develop new drugs in collaboration with universities
and research institutes; second, apply for generic drugs rights before patented drugs’
patents expire; and third, modernize the traditional Chinese medicines (TCM), that is, develop
TCMs in the same quantitative way as is used in developing chemical drugs. The third way
was used in the development of butylphthalide, a traditional Chinese medicine extracted from
celery seeds. Wuxi Pharmatech: WuXi PharmaTech (Cayman),
Inc., through its subsidiaries, operates as a pharmaceutical and biotechnology research
and development outsourcing company in the People’s Republic of China. It provides a
portfolio of laboratory and manufacturing services in the drug discovery and development
process to pharmaceutical and biotechnology companies. In addition, WuXi PharmaTech’s
services include process development, such as process research and process optimization
services to assist customers to manufacture their drug candidates; and manufacturing of
advanced intermediates, which are drug materials prior to refinement into active pharmaceutical
ingredients. Listed on the New York Stock Exchange: Stock symbol ADR (NYSE) WX.
Harbin Pharmaceutical Group Co. is about to become more competitive, with a planned $250
million capital infusion from two foreign investors, Warburg Pincus of New York and
Citic Capital of Hong Kong. That money will allow Harbin to expand its R&D efforts—the
company spends about 5% of revenue on R&D, exceptional for a Chinese drug maker yet just
a third of what most multinationals spend—and help it become predator rather than prey as
the consolidation in the pharmaceutical industry gets more ferocious.
Sinovac Biotech Ltd. (AMEX:SVA) has recently launched marketing of Bilive and expects to
record its first sales in May 2005 a combined Hepatitis A&B vaccine. This is the first combined
inactivated Hepatitis A&B vaccine developed by Chinese scientists, and the vaccine has
only one directly competing combined Hepatitis A&B vaccine in the world, GSK ‘s Twinrix,
which is not available in China and sells for a much higher price than Bilive in countries
where it is for sale. In 2004, the company had sales about $6.5 million sales, more than
two times 2003 sales. Sinovac now has two vaccines fully approved for sale in China.
It is currently the world leader in the development of a SARS vaccine.
Zensun (Shanghai) Sci & Tech Co., Ltd is a bio-tech pharmaceutical company well-versed
in the demands of the international market with a high profit potential based on innovation.
It is devoted to the research and development of new drugs through self-owned intellectual
properties. With adherence to the tenet of “healing for life”, Zensun has long been focusing
on the research of anti-tumor drugs and anti-heart failure drugs. Based on the innovative theory,
Zensun has successfully developed two drugs: Recombinant Human Neuregulin-1 injection,
an anti-heart failure drug, and Recombinant Human ErbB3 fragment injection, a therapeutic
vaccine against tumors, both of which have undergone clinical trials. In 2006, Zensun
(Shanghai) set up a subsidiary company, Zensun (USA), Inc., in San Diego, CA to manage FDA
filing, clinical trials and commercialization process of Recombinant Human Neuregulin-1
(Neucardin), an exciting and novel treatment for chronic heart failure, as well as other
compounds developed by Zensun (Shanghai). In 2009, Zensun (USA) was approved by the
US FDA to conduct a Phase 2a US-based trial of Neucardin administration to subjects with
NYHA Class II and III Chronic Heart Failure. Tonghua Dongbao Pharmaceuticals Ltd., founded
in 1985, is a bio-tech pharmaceutical with headquarters, research and manufacturing facilities
situated in China’s Northern city of Tonghua. In 1998 Tonghua Dongbao became the 3rd company
worldwide to successfully develop and manufacture its own recombinant human insulin line, Gansulin,
for the treatment of Diabetes Mellitus. Its recombinant human insulin production base
is the largest of its kind in Asia, producing both vials of insulin and insulin cartridges
for the Gansulin Insulin Pen. The company is accelerating expansion into markets outside
of China, currently exporting insulin and a variety of other medicines to over 10 countries.===Foreign expansion===
Most Chinese pharma companies with foreign distribution export traditional Chinese medicine
mainly to Asian countries or regions. Their foreign distribution, therefore, is not as
significant as their western counterparts. The Chinese government legalized foreign ownership
of retail pharmacies in 2003. On March 14, 2005, AXM Pharma Inc. (AMEX: AXJ) entered
into a distribution agreement with Sinopharm Holding Guangzhou Co., Ltd. for an expected
purchase amount through December 2005 of RMB 54 million ($6.56 million) for the Company’s
line of Elegance products, formerly known as Whisper.
Additional products, including Anti-Fatigue and Asarone, are expected to be sold in upcoming
quarters. The sales territory includes Guangdong, Guangxi, Yunnan, Guizhou, Fujian, Sichuan,
Chongqing, Hainan, Hubei and Hunan. Sinopharm Holding Guangzhou Co., Ltd., an
affiliate of China National Pharmaceutical Group Corp. is actively engaged in the research
and development, capital investment, manufacture and trade of pharmaceuticals and medical instruments.
Sinopharm has achieved an annual sales volume of 10 billion RMB (over 1.2 billion U.S. Dollars)
and a total import and export volume of 200 million U.S. Dollars.===Foreign companies===
In recent years, more and more western pharmaceutical corporations, such as GSK, Roche, Novo Nordisk,
and others, have come to China and set up R&D centers. Many world leading pharmaceutical
companies have established joint venture manufactories in China. Some have even set up sole propriety
manufactories. As of 2004, amongst the largest 500 overseas enterprises, 14 of them are pharmaceutical
companies. As of 2004 (three years after China’s WTO
entry), nearly all global pharmaceutical companies have already completed their accession into
the Chinese market and will gradually shift their focus to research development. The main
reasons for overseas companies coming to China have been to save costs by using the extensive
science and technology research bases currently in place in China, the abundant human resources,
and less expensive medical and clinical trials.===Foreign production===
The involvement of many foreign pharmacy enterprises operating in China can be dated back to a
century ago. Bayer of Germany, the inventor of aspirin, began trade with China in as early
as 1882. Hoechst AG, known as Aventis, sold its products through 128 distribution agents
across China in 1887, becoming China’s No.1 Western medicine and dyeing provider. The
US Eli Lilly & Co. opened its first overseas representative office in China’s Shanghai
in 1918. ICI, the predecessor of the world’s No 3 pharmacy enterprise AstraZeneca, began
trade with China in 1898, and still maintained its old-time office by the Huangpu River in
Shanghai. As of 2007, there were already 1,800 foreign-funded
pharmaceutical enterprises in China [Reference: https://web.archive.org/web/20080513032052/http://www.pacificbridgemedical.com/publications/html/ChinaDec1998.htm].
Currently, all the top 20 pharmaceutical companies in the world have set up joint ventures or
wholly owned facilities in China. This suggests that market conditions have never been more
challenging, with competition at an all-time high. Pfizer produces and markets more than 40 innovative
drugs in China, and the quality of its products all met the Chinese Pharmacopeia. Pfizer has
GMP manufacturing facilities in Dalian, Suzhou and Wuxi. Its Dalian facility, built in 1989
jointly with Dalian Pharmaceuticals was the first to get GMP certification in China. Pfizer
has invested more than $500 million in China. Lastly, in 2012 Pfizer established a joint
venture with Hisun Pharmaceuticals (Hisun 51% – Pfizer 49%) to market branded generics
under the label Hisun-Pfizer. GlaxoSmithKline has more than 2000 employees
in China, and its drugs are sold in 60 cities. The company mainly sells drugs treating HBV,
asthmas and infections. Merck sells antibiotics, prostate drugs, cardiovascular
drugs, pain relievers, osteoporosis and vaccines. It set up its first joint venture in China
in 1994. Novartis has invested about 100 million in
China, with four manufacturing facilities in Beijing and Shanghai (Changsu). Its core
businesses involve patented drugs, generic drugs, eye protection drugs and health products.
Novartis Beijing was founded by Novartis AG and Beijing Pharmaceutical group and Beijing
Zizhu Pharmaceuticals in 1987, the first foreign pharmaceutical company in China.
Sanofi-Aventis The German-French company sells several drugs in China. Sanofi Aventis runs
three facilities in Beijing, Shenzhen and Hangzhou; currently, they’re in the process
of building a brand new Vaccine Plant outside Shenzhen.
AstraZeneca Pharmaceutical Co. has its headquarters in Shanghai, with 25 branch offices in major
cities across China’s mainland. In 2001, the company established its largest manufacturing
site in Asia with a total investment of $170 million in Wuxi. It sells several products,
including Seroquel and Nexium. It has nearly 3,000 employees working in manufacturing,
sales, clinical research and new product development. It has a presence in more than 110 targeted
cities, with around 800 representatives. Archived 19 December 2007 at the Wayback Machine.
Bristol-Myers Squibb is one of the earliest to enter Chinese market.
Johnson & Johnson sells Tynoline and other drugs in China.
Wyeth’s best-seller in China includes Calcium-D. Roche launched a medical education campaign
targeting 3,500 doctors in 20 Chinese cities in 2004.
Schering-Plough is a worldwide pharmaceutical company committed to discovering, developing
and marketing of new medicines that can improve people’s health and extend life. The company
is the recognized leader in biotechnology, genomics and gene therapy. Shanghai Schering-Plough
Pharmaceutical Co., Ltd, with a total investment of US 37 million, was founded on August 5,
1994 as a joint-venture, with Shanghai Pharmaceutical Industry (Group) Corporation and Shanghai
Corporation of Pharmaceutical Economic and Technical International Cooperation.
Bayer Greater China is Bayer’s second largest single market in Asia, accounting for approximately
one quarter of regional sales. Its interests in this region have grown steadily over the
years, from step-by-step investment in the early 1990s to large-scale, world-class facilities
today. Bayer’s investment in our integrated production site in the Shanghai Chemical Industry
Park makes it evident that Bayer regards Greater China as one of its most important markets
worldwide. Bayer’s Greater China Group operates in the market encompassing Hong Kong, Taiwan,
and China. The Bayer Group in Greater China is led by management holding companies, with
the subgroups and production joint ventures operating independently under their strategic
direction. The Country Group Speaker, Dr. Elmar Stachels, leads the Group in Greater
China. The Greater China Group employs ca. 2,800 people across a wide range of functions.
Companies and Locations: Bayer currently operates 18 companies in Greater China. Eight of them
now have production facilities on stream in all business segments in which the company
is active. Local production accounts for an increasing proportion of sales. Bayer China
is engaged in a number of cooperation projects with some of the foremost research institutes
and universities in China, to conduct research in the field of innovative materials, health
care and crop science. It strongly cooperates with the Chinese Academy of Science and affiliated
institutes such as the Institute of Materia Medica and the Kunming Institute of Botany
in Yunnan with the aim to identify new compounds in the healthcare and crop science field.
There are also a number of projects currently being started in polymers research. In addition,
Bayer also supports a number of chairs and programmes for research and teaching at Chinese
universities. These include the Tsinghua-Bayer Public Health and HIV/AIDS Media Studies Program,
a national platform designed to play a key role in China’s public health system. Furthermore,
Bayer HealthCare supports a chair for Healthcare Management at the China European International
Business School (CEIBS) in Shanghai. Boehringer Ingelheim entered Chinese market
in 1995 and invested $25 million in a new facility in Shanghai in 2002. Its drugs treating
respiratory diseases and cardiovascular diseases have established well in Chinese pharmaceutical
markets. Hoechst Marion Russel established its China
head offices in Beijing in 1995 to manage operations in mainland China and Hong Kong.
HMR has two joint ventures in China, Hoechst Huabei Pharmaceuticals Ltd in Shijiazhuang,
a heartland of the Chinese pharmaceutical industry, and Hoechst Shanghai International
Pharmaceuticals Ltd. Eli Lilly set up its first overseas office
in Shanghai in 1918 and returned to Shanghai, China in 1993. Its main facility is in Suzhou,
Jiangsu province and main products include Ceclor, insulin, and erectile dysfunction
drug ED. Abbott Laboratories Ltd sells a series of
products including baby food in China. Xian-Janssen: Among foreign-invested ventures
in China, Xian-Janssen Pharmaceutical, located in Xi’an is regarded as a model. It has ranked
among the top 10 joint ventures in terms of revenue since 1991, thrice landing in the
number one spot. The company’s success is due partly to its product line, which includes
a range of high-volume sellers: medicines to treat gastronintestinal problems, fungi,
allergies and pain, as well as psychosis and epilepsy. But it was Dr. Paul Janssen’s
decision to enter China early, to invest inland, and to keep investment plans moving along
in the wake of 1989 Tiananmen Square event that have helped build its good relations
with the Chinese government. Paul Appermont and Joos Horsten lead the Xian-Janssen Pharmaceutical
project. Degussa is shifting a large proportion of
its pharmaceutical chemicals production from Europe to China in order to take advantage
of low-cost manufacturing and improved production efficiencies in the country. At the same time,
the company will restructure some of its large production facilities, the vast majority of
them in Germany, which could result in the transfer of the manufacture of other products
to China. Rhodia is improving its competitive position
in analgesics by reinforcing its more cost-effective manufacturing operations. The company is making
a major investment in its Wuxi, China, paracetamol (acetaminophen or APAP) production facility
and consolidating its North American and European operations. Rhodia shuttered its Luling, La.,
paracetamol operations in 2004 and consolidated production in Roussillon, France, and Wuxi,
China. Following these changes, paracetamol production capacity will be adjusted to match
current levels.Japanese companies: Sankyo: Having previously generated revenues
from exports to local agencies allied with its own marketing, Sankyo completed a plant
for manufacturing its drugs in October 2003, and plans to expand its own marketing. It
expects to double the number of marketing representatives (MRs) to 130 in 2004, and
increase sales in China from ¥3.0 billion currently (company estimate for 2003) to ¥5.0
billion within a few years. Sankyo already markets hyperlipemic Mevalotin, anti-inflammatory
Loxonin, and antibiotic Banan in China, and plans to market hypertensive Olmesartan (currently
under development) there in future. Takeda: The company basically does its own
marketing (sales value estimated to be ¥1-2 billion). It also has a manufacturing plant.
In 2004 Takeda planned to launch diabetes drug Actos in China, and then it will be marketing
all four global products (Actos, anti-ulcer Takepron, cancer drug Leuplin, and hypertensive
Blopress). However, the US has priority in its overseas strategy, followed by Europe
and then Asia. Yamanouchi: The firm moved into China in 1994
and does most of its own marketing, covering anti-ulcer Gaster and urinary impediment treatment
Harnal among its leading products. Sales are gradually expanding, and operating profitability
was achieved in 2001. Accumulated losses have been wiped out during F2003. The company owns
a manufacturing plant. In 2004, there are plans to launch Dolner for peripheral circulation,
anti-emetic Nazea OD, and hypertensive Hypoca. Yamanouchi does not have plans to increase
its 110 MRs significantly at this point. Daiichi: Shifted to in-house marketing after
establishing a sales subsidiary in 1998, mainly selling synthetic antibacterials Cravit (oral
and injectable) and Tarivid. It originally planned to launch neurotransmission enhancer
Translon too, but after development was halted in Japan, development in China also ended.
In 1998, it forecast sales of ¥12.0 billion in 2002, but only actually recorded ¥1.6
billion. Sales are behind plan chiefly due to the suspension of Translon’s development
and the proliferation of generic and copycat versions of Cravit. On the earnings side,
Daiichi expects to move into operating profit in F2004 as Cravit sales expand. It does not
currently plan to expand its force of MRs much from 140-150, but expects to do so when
urinary impediment treatment KMD-3213 (Phase 1 under preparation) is launched, which will
be 2007 at the earliest. Tanabe: Markets in-house products such as
hypertensive Herbesser and Tanatril. Tanabe does not disclose mediumterm targets, but
plans to double the number of MRs to 200 by the end of 2005. No products are currently
in clinical trials, but there are a number of development candidates.
Mitsubishi Tanabe Pharma: The China subsidiary Kuangchou Green Cross has been extending transfusion
business (manufacturing, sales) since the days of the former Green Cross, but both sales
and profits have been flat for the past several years. The firm has already sold off its transfusion
business in Japan to Otsuka Pharmaceutical as part of its restructuring, and the strategic
importance of this is diminishing. Anti-coagulant Novastan, which was approved and launched
in China in December 2002, is being sold not via Kuangchou Green Cross but by a local agent.
Astellas: Immunosuppressant Prograf is being marketed in China by an 80%-owned subsidiary
An application has been filed to sell a second product, atopic dermatitis treatment Protopic.
It has a relatively large number of MRs at 30-40 (the subsidiary has 60 employees); by
comparison, Prograf has 40 MRs in the US. China business is less of a priority for Astellas
than the US or Europe, but sees its potential as significant due to the large number of
organ transplants. In 2000, there were 5,501 kidney transplants performed in China, second
only to the number in the US (13,372). Sales of immunosuppressant drugs are relatively
high. The top 30 drugs by sales in China (hospital market base) included two such drugs: Novartis’
Neoral at number 22 ($16.1 million), and Roche’s CellCept at 23 ($15.8 million).
Chugai: China is not positioned as a priority market for Chugai, which has focused on Europe
since coming under the Roche group. Exports of white blood cell production stimulant Neutrogin
account for most of its business in China, with marketing consigned to agents. Kirin’s
Gran, another GCSF drug, is marketed in China by Kirin itself and recorded 2002 sales of
$11.1 million, ranking it 45th in the hospital market.
Eisai: The firm expanded its own manufacturing and marketing operations into China and Asia
earlier than in the European and US markets. Its sales and profits in F2002 and own projections
for F2003 place Eisai as number one among Japanese firms in China. Eisai was the first
manufacturer among the US, European and Japanese pharmaceutical firms to manufacture in China
via a 100% owned subsidiary from the very beginning (founded in 1994). The sales target
for 2006 is an ambitious ¥20 billion. By 2006, Eisai plans to increase the number of
MRs from 150 to 250, and extend its coverage from 1,000 hospitals in 53 cities to 3,000
hospitals in 100 cities. It already sells two global products, anti-ulcer drug Pariet
and Alzheimer’s treatment Aricept, and plans to add osteoporosis drug Glakay in 2006.
Kyowa Hakko: Having previously only exported cancer drugs (a few hundred million yen’s
worth), Kyowa Hakko plans to get approval and then start marketing itself thehypertensive
Coniel at the end of 2004. Ant-allergy Allelock should also go on sale in 2007, with peak
sales for the two combined projected by the firm at over ¥2 billion.
Taisho: The company makes and sells health drinks (tonics) in China, but has no specific
plans for prescription drugs. The rights to antibiotic Clarith/Biaxin outside Japan are
licensed to Abbott. Terumo: Unlike the drug makers, Terumo is
using China as a manufacturing base (almost all of its 1,362 employees there are in manufacturing).
Its manufacturing subsidiary when set up in 1995 specialized in making products for the
Japanese market, but more recently this has been producing and shipping products for the
US and Europe as well. Terumo is still in the process of exploring China as a market,
however. For more than 20 years, it has sold products using agents in China via its Hong
Kong subsidiary, but F2002 sales amounted to only ¥1.3 billion (low-margin products
are not handled, so there are profits). It plans to consider the possibility of in-house
marketing, going forward.===Foreign companies doing R&D in China===
After China’s entry into the WTO, many leading pharmaceutical companies are transferring
their research and development centers to China. For instance, Roche of Switzerland
opened its R&D center in Shanghai recently, GSK has established its OTC research and development
center in Tianjin, China, and Pfizer and Janssen Pharmaceutica (Johnson & Johnson) will carry
out similar plans in the near future. AstraZeneca, Bayer, Eli Lilly and Company, and Hoffman-La
Roche, have also set up R&D or clinical trial centers in China.
A poll on 33 foreign pharmaceutical enterprises in China shows that seven out of the 33 companies
have R&D centers in China, accounting for 22% of the surveyed. The remaining 26 pharmaceutical
enterprises have no R&D centers in China, accounting for 78% of the surveyed. All the
R&D centers were founded after 1999, mainly in 2000 and 2001.
In January 2004, Roche of Switzerland opened its research and development center, the fifth
R&D center of the pharmaceutical giant, and the first to be established in China. Roche
planned to hire 40 to 50 scientists in the first year and focus their research on pharmaceutical
chemistry study. The center aims to step into traditional Chinese medicine research. Novo Nordisk has a $10 million research-and-development
center at the Shangdi High-Technology Park in Beijing.
Lonza (Basel, Switzerland, www.lonza.com) has opened a facility in Guangzhou, China;
Discovery Partners International (San Diego, CA, www.dpi, com) has affiliates in China.
Chiral Quest has a research and development facility at a biotechnology R&D park at Jiashan,
China near Shanghai. Affymetrix, Inc. and CapitalBio Corporation,
a leading life science company based in Beijing, China formed a strategic relationship to jointly
develop and co-market a proprietary, advanced GeneChip.Foreign companies doing drug testing
or clinical trials in China: SiniWest Holdings; Headquarters: San Diego;
Product Tested in China: Drugs to treat breast cancer and peptic ulcers; Current Status:
Did preliminary studies in China; plans U.S. research trial.
Cancer Therapeutics; Headquarters: Los Angeles; Product Tested in China: Treatment involving
antibodies that deliver radiation to kill cancer cells; Current Status: Expects approval
in China this summer; approval in U.S. still three to four years away.
FeRx; Headquarters: San Diego; Product Tested in China: Drug to treat liver cancer; Current
Status: In research trials in both U.S. and China.
Frontage Laboratories; Headquarters: Pennsylvania; Products Tested in China: Helping domestic
firms to conduct IND enabling studies for new CNS, Cancer and Cardiovascular drugs with
GLP operations in Shanghai, GMP operations in Beijing, and Clinical operations in Beijing
and Zhengzhou (currently established 150 research beds in two centers); Current Status: In drug
development experiments, preclinical and clinical trials in both US and China.==Governmental policies==
China’s pharmaceutical industry has been a major industry that was completely directed
by the state and subject to central planning, upon which transition-era reforms since the
1980s to this day have had a major impact. The pharmaceutical industry has been shaken
up following the implementation of several government-initiated structural reforms.The
main reforms included: 1. Requiring all pharmaceutical manufacturers
to meet GMP standards by 2004, 2. Diminishing drug sales through hospitals,
3. Bidding publicly for drug purchase, 4. Implementing a national healthcare insurance
system, and 5. Strengthening intellectual property protection
and SFDA supervision. The overall goal has been to improve manufacturing
and distribution efficiencies, strengthen drug safety supervision, and separate hospitals
from the drug retailing business.==Regulation==
With the increasing growth of the Chinese pharmaceutical market, the government realised
the importance of supervision of pharmaceutical market. They put forward several regulations
and reform measures over the past couple of years, especially in the recent period of
healthcare reform. The most influential issues for foreign companies are the decree of Administration
Method of Import Pharmaceuticals recently promulgated by the State Drug Administration,
and the launch of a new version of registration certificate for import pharmaceuticals. Despite
these advances China is still the leading manufacturer of counterfeit drugs, which claim
the lives of people worldwide every year. June 2009, Nigeria has seized a large consignment
of fake anti-malarial drugs with the label of ‘made in India’ but found that the medicines
were in fact produced in China and were imported into the African countries.[4] The authorities
have maintained that the incident is not isolated, indicating that it was just the tip of the
iceberg.===Regulatory agencies===
State Food and Drug Administration: As part of the government restructuring announced
in March 1998, the Ministry of Health’s Department of Drug Administration merged with the State
Pharmaceutical Administration of China (SPAC) to become the State Drug Administration (SDA).
As a result, SDA oversees all drug manufacturing, trade, and registration. In 2003, the SDA
was restructured to become the State Food and Drug Administration.Other former functions
of the ministry have been assigned to different government bodies. The most important of these
was the transfer of medical insurance responsibilities to the new Ministry of Labor and Social Security.
Nonetheless, the Ministry of Health retains its other main functions-regulatory development
and oversight, healthcare resource allocation, and medical research and education.
The Chinese government’s establishment of a single drug regulatory authority was an
important step toward foreign access, because it eliminated the conflicting standards that
prevailed among provincial government agencies, centralized the Chinese healthcare regulatory
system, and made it more transparent. SFDA now oversees all medications-both Western
and TCM-as well as advertising. Its new regulations follow FDA’s model.
Depending on the product and circumstance companies seeking to receive pharmaceutical
approval might additionally have to register their product with the General Administration
of Quality Supervision, Inspection and Quarantine AQSIQ.
In July 1999, as part of medical insurance reform, SFDA released its first list of over-the-counter
(OTC) medications, and in 2000, the state began to regulate OTC and prescription drugs
separately. SFDA did so to encourage patients to purchase OTC medicines for less serious
diseases, thereby reducing government medication expenditures and hospital visits.
The SFDA plans to cut the number of manufacturers down to around 2,000 over the next two years
by attrition and by requiring remaining firms to meet the new GMP standards. In fact, SFDA
required all pharmaceutical companies in China to obtain GMP certificates from SFDA by June
30, 2004 to be licensed to sell their drug products in China. About 3000 of the companies
met the deadline; companies in the process of obtaining certification may subcontract
secondary production to a certified company until June 30, 2005.
In 2005, SFDA launched a regulation on drug research and supervision management aimed
at enforcing GLP to investigative drugs, traditional Chinese medicine injections and biotechnology
products. The regulation aims to help China’s drug research and development gain international
recognition. National Development and Reform Commission:
The function of the agency includes making strategic planning and mid to long term planning
for the Chinese pharmaceutical industry, regulating the prices of drugs, managing disaster relief
funds and carrying out the pharmaceutical development projects sponsored by the government.
Ministry of Commerce: The government organization regulates the import and export of medical
devices and equipment, collects and analyzes import and export data, and carries out anti-dumping
investigations. Ministry of Labor and Social Security: The
agency is responsible for the management of state medical insurance systems.
Ministry of Health: The agency guides the reform of the medical service industry, is
responsible for clinical trials and clinical applications of drugs, joins with other agencies
in monitoring the severe side effects of drugs, and makes the basic insurance drug list.
State Traditional Chinese Medicine Administration: The agency focuses on policies and regulations
related to traditional Chinese MEDICINES. State Population and Family Planning Commission:
The agency writes the regulations on the use of birth control tools and pills.
Ministry of Science and Technology: The agency determines new product development projects,
evaluates and registers new research and development achievements; issues grants and funds for
small to mid business innovative investment. State Quality Control Administration: It enacts
and implements national standards. Industrial Associations: Include China OTC
Association, China Pharmaceutical Quality Management Association, China Pharmaceutical
Commerce Association, and others.===Regulatory requirements===
China quickly advanced its pharmaceutical-related regulations around the time of its December
2001 entry into the World Trade Organization (WTO). China has strengthened patent protection:
In conformity with the WTO/TRIPS agreement, the patent protection structure adopted by
China approaches that of Japan, Europe, and the US. Since the end of the 1990s, the government
has been striving to develop a healthcare insurance system that covers 200 million Chinese.
Already, 90% of the population in major cities like Shanghai, Beijing, and Guangzhou are
covered, for a total of over 80 million. The Pharmaceutical Management Law was overhauled
in December 2001, and various regulations were enacted from 2002-2003. Transparency
in the approval process is gradually improving. Following WTO regulations, China has committed
itself to cutting tariffs, liberalizing its domestic distribution practices, and restructuring
its regulatory environment. China has allowed foreign enterprises to import products and
engage in distribution services. Furthermore, China has also implemented new drug administration
laws designed to streamline product registration and protect Intellectual Property Rights (IPR).
China has agreed to six years of “data exclusivity” and has committed itself to implementing a
patent linkage system. The SFDA has worked to crack down on counterfeiters but without
greater resources and stricter legal consequences, these actions alone have yet to be enough
to curb this rampant problem. Since 1998, the government has raised the
bar for entering the pharmaceutical business by passing laws including Drug Management
Law and Regulations on Pharmaceutical Manufacturing. They involve following aspects of pharmaceutical
manufacturing, drug distribution and selling, drug registration, requirements for manufacturing
traditional Chinese medicines, medical packaging manufacturing requirements, and medical device
manufacturing requirement. The new laws will likely have an adverse effect
on market growth and profitability during the transitional period, but over the next
5–10 years this market should be able to provide the returns.===Government drug pricing policy===
In order to alleviate the burden of medical expenses on the society and ensure the implementation
of the medical insurance scheme, retail prices of pharmaceutical products qualified for the
program and included in the National Basic Medical Insurance Scheme Drug Catalogue will
be regulated. The pricing mechanism is based upon three considerations when setting the
maximum retail price – production cost, a wholesaler spread set by the government and
the prices of comparable products in the market. Any products priced above this level will
be cut.===Centralized tendering drug procurement
program===The centralized tendering procurement system
operates in two ways. First, several hospitals and medical institutions join together to
invite tenders. Then, they appoint qualified agents to handle tenders. These agents are
prohibited from having ties with the industry regulatory or administrative bodies.
In 2002, 70% of public hospitals at county or above level implemented this tendering
system. This system has successfully passed the pilot phase and proven effective. Both
the number of participating hospitals and variety of drugs expanded substantially.
More power to hospitals and medical institutions. In a market economy, hospitals and medical
institutions do their own drug procurement. They source drugs from manufacturers at market
prices and dispense them to patients. The centralized tendering drug procurement system,
however, gives more power to hospitals in drug procurement. As a result, some unfair,
unjustified and unreasonable practices surface as decision makers of some hospitals abused
their power in order to get economic benefits.===GMP compliance certification===
GMP is a system to ensure products are consistently produced and controlled according to quality
standards. It is designed to minimize the risks involved in any pharmaceutical production
that cannot be eliminated through testing the final product. A directive circular issued
by the Ministry of Health in Jul 95 marked the official launch of GMP certification in
China. The China Certification Committee for Drugs (CCCD) was established in the same year.
A subsidiary organization was also set up to manage the certification program.
Currently nine government agencies are the key agencies responsible for regulation. They
are the State Food and Pharmaceutical Administration (SFDA), the State Development and Reform Committee,
the Commerce Ministry, the State Traditional Chinese Medicine Administration, the Ministry
of Labor and Social Security, the Ministry of Health, the State Population and Family
Planning Committee, the Ministry of Science and Technology, and the State Quality and
Technology Supervision Administration. In addition, more than 10 industrial associations
also regulate the industry.===Comparison of regulatory requirements
with other countries===The enforcement of Good Manufacturing Practices
has not been adequate in China and the U.S. FDA and EMA (European Medicines Agency) have
inspected Chinese pharmaceutical plants that export to their countries and found many to
be seriously non compliant with GMP.There should be no big differences between rules
of China and those of the U.S. Pharmaceutical, partly because China is following and copying
U.S. rules. Chinese regulations affect nearly every aspect of drug manufacturing, from the
design and construction of manufacturing facilities to the development of procedures and the training
of operations personnel performing them. There is only federal regulation on new drug
application, but there are both local regulation and national regulation regarding pharma expenditures
of hospitals, reimbursable drug lists, and other issues. National regulation is implemented
by SFDA and other state agencies, while local regulation is implemented by provincial agencies.
Through related laws, China has established a physician licensing system, which requires
physicians to pass a national exam to be eligible for applying for licenses. After passing the
exam, physicians will be eligible for applying for certificates for the practice of medicine.
Licensed physicians can open their own clinics five years after getting licenses, during
which they must work as physicians. There is a mechanism for approving new drugs
(from NDA filing to approval). A full three-phase research trial takes three to five years,
similar to the U.S., while requirements to start a trial are onerous by foreign standards,
according to Western drug-company executives. Although the approval time is being shortened,
there still remain many aspects where transparency is lacking.===Patents===
Western pharmaceutical companies have applied for numerous patents in China. About 10,000
patents for traditional Chinese medicines belong to Western companies. However, some
Western observers say China lacks administrative protection for patents.
In 1992, the United States and China signed a memorandum of understanding (MOU) to allow
administrative protection (AP) in China for US pharmaceutical patents granted between
1986 and 1992. The MOU provided seven-and-a-half years of market exclusivity, or AP rights,
in China for pharma patents that were: not protected by exclusive rights before the amendment
of current Chinese laws; patent protected after 1 January 1986 and before 1 January
1993 in an MOU signatory country; not previously marketed in China. Several Chinese government
policies have prevented US industry from realizing the intended MOU benefits. According to Article
42 of the Patent Law, the duration of patent right for inventions is twenty years, and
the duration for utility models and patent right for designs is ten years, counted from
the date of filing. The State Intellectual Property Office is
responsible for enforcing patents. The intellectual property system in China was originated from
and developed as a result of the policy of reform and opening-up. The State Council,
the Patent Office of China, the predecessor of SIPO, was founded in 1980 to protect intellectual
property, encourage invention and creation, help popularize inventions and their exploitation,
and promote the progress and innovation in science and technology.
In 1998, with the restructuring of the government agencies, the Patent Office of China was renamed
SIPO and became a government institution under the direct under control of the State Council.
The office is in charge of patent affairs and deals with foreign-related intellectual
property issues.===United States and China===
As a member of the World Intellectual Property Organization, China is active in protecting
international patents. The SIPO has signed intellectual property protection memorandums
with countries including Russia and Thailand on the protection of intellectual properties.
Such agreements are necessary to protect international patents in China.
On July 14, 2005, China and the United States reached an agreement on intellectual property
protection. According to western pharmaceutical business journals, most discouraging to US
pharmaceutical companies has been the rampant theft of their intellectual property through
patent infringement and counterfeiting. All those factors undermined the competitive advantage
that innovative pharmaceutical companies stood to gain from marketing investments. As a result,
US companies accounted for less than 10 percent of China’s total pharmaceutical imports between
1998 and 2000. China has more recently agreed to implement
the Trade Related Intellectual Property Agreement of the Uruguay Round. To comply, Chinese companies
will have to change their long-time practice of relying on counterfeit products. According
to China’s Securities Times, foreign companies will be able to file compensation claims ranging
from $400 million to $1 billion against companies that copy patented medicines.===Articles 18 and 19===
Chinese patent law addresses foreign companies in articles 18 and 19. Under Article 18, where
any foreigner, foreign enterprise or other foreign organization having no habitual residence
or business office in China files an application for a patent in China, the application is
treated in accordance with any agreement between the organization’s host country and China,
or any international treaty to which both countries are party, or on the basis of the
principle of reciprocity. Under Article 19, where such an organization
applies for a patent, or has other patent matters to attend to in China, it must appoint
a patent agency designated by the patent administration department under the State Council to act
as his or its agent. The patent agency is mandated to comply with
the laws and administrative regulations, and to handle patent applications and other patent
matters according to the instructions of its clients. The agency bears the responsibility
of keeping the contents of its clients’ inventions-creations confidential. The administrative regulations
governing the patent agency are formulated by the State Council.==Distribution==
The Chinese pharmaceutical distribution sector is very fragmented with about 10,000+ state-owned
pharmaceutical wholesalers. Direct marketing to doctors (detailing), which is the basic
marketing activity in developed countries, complemented by advertising, is not developed
in China. Chinese hospitals generate 60 percent of their revenues from the sale of prescription
drugs. Hospital pharmacies are still the main retail outlets for pharmaceuticals, accounting
for 80 percent of total drug sales. This situation is changing because the government is encouraging
the establishment of retail pharmacies that are not associated with hospitals.
Drugs are distributed in China through the Chinese-style channels. China has a three
tiered distribution system. At the top of the ladder are national level-1 stations in
Beijing, Shanghai, Shenyang, Guangzhou, and Tianjin. These allocate products to provincial
level-2 distributors, who in turn sell to county and city level-3 wholesaler-drug stores.
At the bottom of the distribution chain are China’s vast numbers of small retail stores
are difficult to reach individually.==Pharmaceutical Logistics==
At present, China’s pharmaceutical logistics industry is featured as small-scale, scattered
investment and fierce competition. China’s pharmaceutical logistics industry is mainly
composed of pharmaceutical manufacturers and pharmaceutical distributors. China has 16,500
wholesalers, 120,000 retailers and more than 6,300 producers. In terms of sales, China’s
top three companies: Sinopharm Group, Shanghai Pharmaceutical Co. and Jiuzhoutong Group Corp.,
are all shared less than 5% of the national market.
Since 2002, China’s pharmaceutical logistics industry has been expanding constantly. A
great amount of capital is being poured into the industry. In 2007, China had three pharmaceutical
logistics centers put into operation, namely, Jiangsu Yabang Medicine Logistics Center,
Quanzhou Medicine & Food Logistics Port and Chongqing Medicine Heping Logistics Center.
Large pharmaceutical logistics projects that initiated the construction in 2007 include
the China-ASEAN (Tongji) Medicine Logistics Center invested by Guangxi Tongji Medicine
Group with CNY145 million, the Nantong Suzhong Pharmaceutical Logistics Center with a total
investment of CNY280 million, and the Chongqing Modern Medicine Logistics Center Project jointly
invested by Shenzhen Neptunus Bioengineering Co., Jinguan Group and Chongqing Huabo Medicine
Co. Based on the statistics from the China Association
of Pharmaceutical Commerce and China’s Medicine and Healthcare Product Import and Export Association,
in view of the features of China’s pharmaceutical logistics industry, China demands urgently
to create a group of large trans-region, trans-industry and trans-ownership Pharmaceutical logistics
conglomerates through restructuring the industry and forming an alliance. As for the construction
of logistics centers, it is better to build them jointly. In this way, it will help carry
out management on the entire logistics operation to speed up the flow of drugs, improve circulation
efficiency and reduce logistics cost.==End users==
There are two types of end users for in China: hospitals and retail pharmaceutical franchising
stores. According to a 2004 sample investigation of hospitals in 16 cities, it was estimated
that Chinese hospitals purchased a combined total of U$2.5 billion in drugs, an increase
of 27% over 2003. The total revenue from pharmaceutical franchising stores was US$5.6 billion in 2004,
an increase of 36% over 2003.==Retail operations==
Due to China’s former planned economy system, hospitals are still the main distributors
of pharmaceuticals. In 2003, only 15.1% of total drug expeditures were incurred at pharmacy
stores.(Meng 2005) The Chinese government legalized foreign ownership of retail pharmacies
in 2003. Corporations such as Alliance Boots have formed retail and distribution joint
ventures in China, mainly focused on Guangdong province.Many companies have said that the
drug distribution system in China is inefficient and adds considerably to the retail costs
of medicine. Also there have been complaints of unclear regulations, low profitability,
complex licensing procedure, hospital bidding, and reimbursement schemes.==Dietary supplements==
The dietary supplements sub-sector has doubled from $3 billion in 1998 to a total sales volume
of $6 billion in 2001. Experts estimate that the industry will reach $10 billion in annual
sales by 2010, and will continue as consumers seek products with curative weight loss and
other health enhancing effects. Over 3,000 domestic manufacturers of dietary supplements
produce more than 4,000 different types of products. Domestic manufacturers fail to develop
product branding and credibility and rely heavily on advertising to generate sales.
As such, most domestic products, due to loss of credibility amongst consumers, tend to
have short life cycles. High quality imported products only account for 10% of total sales.
Companies say that complicated product registration, expensive and time-consuming certification
requirements, and inexperienced and inefficient distributors are common obstacles.==Education and research==
There are many institutes of higher learning in China that are engaged in pharmaceutical
research. (See Pharmaceutical higher institutions in China.)==Intellectual property rights====
See also==China Pharmaceutical Industry Association
Pharmacy in China Medicine in China and Public health in China
Pharmaceutical policy National pharmaceuticals policy
Pharmaceutical marketing List of pharmaceutical companies
Protein structure prediction Drug design
Rational drug design Bioinformatics
Cheminformatics Biomedical informatics
Orphan drug Physiologically-based pharmacokinetic modelling
Pharmaceuticals in India Generic drug
New chemical entity (NCE) Quality assurance (QA)
Quality control (QC) Pharmacovigilance
State Food and Drug Administration General Administration of Quality Supervision,
Inspection and Quarantine==
Notes and references====Bibliography==
Meng, Cheng, Silver, Sun, Rehnberg, Tomson. (2005) “The impact of China’s retail drug
price control policy on hospital expenditures: a case study in two Shandong hospitals”. Oxford
University Press. [1] Hu Yuanjia, Carolina O.L. Ung, Bian Ying and
Wang Yitao. “The Chinese pharmaceutical market: Dynamics and a proposed investment strategy”.
Journal of Medical Marketing (2007) 7, 18–24. doi:10.1057/palgrave.jmm.5050061 [2]
Eliza Yibing Zhou. China Pharma Basking In Its Spotlight Mar 1 2007 (Clinical research
& diagnostics Channel Vol. 27, No. 5) Cheri Grace. Changing intellectual property
rights in the Chinese pharmaceutical industry June 2004 (Access to medicines) DFID Health
Systems Resource Centre China’s Pharmaceutical Industry Has Been Growing
at 20% on the Average in Production – Reuters Jan 9, 2008
Patent System to Catch Up with Pharmaceutical Industry Expansion – China Law & Practice,
May 2008 2007-2008 Annual Report on the Development
of China’s Pharmaceutical Industry Industry Research Center, CCID Consulting
Jean-François Tremblay China’s Pharma Leaps Into Discovery Chemical & Engineering News
February 4, 2008 Volume 86, Number 05 pp. 11–15.
Api manufacturer Api Supplier and Api Manufacturer Api Supplier and Api Manufacturer
Seamus Grimes and Marcela Miozzo (2015) Big Pharma’s Internationalization of R&D to China,
European Planning Studies. 23(9) 1873-1894.==External links==
What about the financial crisis for the pharmaceutical industry in China?, Asia Manufacturing Pharma
China’s APIs industry expected to be indirectly impacted by financial crisis, Asia Manufacturing
Pharma ChinaBio Accelerator Archived 8 December 2007
at the Wayback Machine., non-profit organization China’s drug industry set to take off, Oct
11 2007 Chemistry World, RSC Huge project to boost Chinese drug development,
15 January 2008 Chemistry World, RSC Can China’s Biopharmaceutical Industry Catch
Up with Industrialized Countries? (May 9, 2006) National Research Center for Science
and Technology for Development China Strides Toward Global Pharma Role March
12, 2007 Chemical & Engineering Volume 85, Number 11 pp. 15–19
China’s pharmaceutical industry Archived 16 May 2008 at the Wayback Machine. PricewaterhouseCoopers
Pharmaceutical Industry in China – Intellectual Property Protection, Pricing and Innovation
Archived 22 June 2008 at the Wayback Machine. Institute of Developing Economies, Japan External
Trade Organization Overview of Chinese Regulatory Framework,
China Drug ConsultingPharmaceutical policy & distributionChinese Pharmaceutical Policy
Studies – Ziyan Wang, WHO Health Systems and Services, Medicines and Health Technologies
Drug policy in China: pharmaceutical distribution in rural areas
Pharmaceutical Distribution in China Eliza Yibin Zhou, Feb 1, 2007

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