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Vol 20, No. 01, January 2016   |   Issue PDF view/purchase
An Overview of Biopharma Industry in China

1. What is the current landscape of China’s biopharma industry?

Dynamic and challenging. Dynamic in the sense of size, growth and innovation. China is the world’s most populous country, with 1.3 billion people; biopharma sales have been booming with 15 to 18% growth per year China has just passed Japan to becoming the second-largest pharmaceutical market after the United States (IMS Institute for Healthcare Informatics, 2014). Huge investment from the central and local governments is fueling China biopharma R&D growth, and China is one of the several countries in Asia displaying innovation in both products and processes – a harbinger of global leadership.

These factors represent a huge opportunity. For multinationals, the key to success is leveraging local R&D advantages to accelerate the introduction of innovative drugs to China and Asia-Pacific – especially for -diseases prevalent among Asians. For local companies, the key is to establish and generate a clear strategy for growth i.e. focus on growing in the booming local markets, or aim to become a global player, and a combination of partnering and outsourcing to execute those strategies, while remaining nimble and lean.

The China market also is extremely challenging. Healthcare in China is being squeezed between greater demand and tighter cost constraints resulting implications for biopharma. China’s disease burden is increasing, driven by a rapidly aging population (e.g. 10 million patients with dementia); the changes in lifestyles from rural to urban, and soaring obesity (e.g. diabetes and heart disease); and air pollution and smoking (e.g. respiratory disease, cancers).

At the same time, the Chinese government is overhauling the nation’s healthcare system to providing all citizens with access to basic healthcare by year 2020, while capping total public healthcare expenditures 7 percent of China’s gross domestic product. The demand for innovative, yet affordable therapeutics poses a high market access hurdle for biopharma companies in China and throughout Asia.

Regulatory review and approval timelines in China are still long compared to other markets. Multiple regulatory agencies are contemplating initiatives to tighten drug development oversight; these initiatives, if enacted, would tend to level the playing ground for multinational and local companies, but also may further complicate regulatory processes.

Corruption is an issue in China. Bribery scandals have made international headlines, damaging the industry’s reputation, slowing sales of multinational companies’ products in China. This factors make it harder for sales representatives to detail products to doctors there – a challenge that continues into 2015. ("Ouch, the Chinese bribery scandal is hurting big pharma", Forbes, 2013)

2. What are the areas in which they are lacking and what kind of growth or changes are they looking towards? What are some of the factors that can help or hinder their growth?

We can divide the China biopharma market into three broad segments: multinationals looking to expand R&D and sales there; local Chinese companies targeting local markets and patients; and local companies with global ambitions – perhaps to become China’s first “global giant” of biopharma.

For multinationals, one of the greatest opportunities – and challenges – is to transform their traditional R&D model to one that leverages partnering, Asian innovation and 21st century technology. The dynamic China market offers opportunities to create that new model, but changing from the traditional “Big Pharma” vertically integrated model to one based on alliances and innovation is difficult.

Local Chinese companies are building themselves from the ground up using modern data analytics, technology, outsourcing, and partnering. They don’t need to stop and turn around – they’ve hit the ground running. That is one great advantage for local Chinese companies.

We believe wise and far-sighted strategic outsourcing and partnering will be the difference-maker for local companies with global ambitions. Through partnering, local companies will be able to access the infrastructure and expertise needed to enter global markets while remaining nimble and flexible.

The greatest hurdle faced by those companies is the lack of expertise in market access to the European Union and United States. The goal line for biopharma R&D has changed in those markets. Since the 1990s all products and biopharma companies have to undergo regulatory approval. China local companies can reasonably obtain the knowledge and skills to gain regulatory approvals in the EU and US. Market access, however, is the bigger challenge.

Market access is a complicated, opaque and evolving area. Many biopharma companies-based in the US and EU struggle with it in those markets. Most Chinese companies have limited knowledge to navigate the market access terrain. This is a growth limiting factor for local companies with global aspirations.

For China, EU or U.S – the lynchpin of market access is evidence of value. Companies must be able to provide evidence on the value of innovative, higher-cost medicines vs. lower-cost standards of care. The aforementioned change has already been evidently seen in the US and EU. The widespread use real-world and late-phase research to provide payers with evidence of a new therapy’s value.

Planning for reimbursement negotiations / market access starts in Phase I, and this shapes each step of the developmental processes. Companies that understand this and adapt accordingly will be well placed to fulfill their growth potential.

Similarly, with the Chinese government looking to control costs while expanding healthcare access, Chinese healthcare bureaucrats will be looking for answers to this key question when determining whether a new disease therapy will be reimbursed: “How well does it work in the Chinese population vs. the traditional standard of care?”

3. What are some of the reasons the biopharma industry is looking to grow?

Growth is a necessity for biopharma companies looking to discover and to develop innovative products, whether multinationals or China local companies with global growth aspirations.

Local companies pursuing a strategy of local or regional growth tend to focus on producing low-cost drugs. Growth has a less important role to play in such a strategy, which is best suited for generics, biosimilars and “me-too” drugs because they are relatively cheap to develop. Providing such non-innovative but low-cost products serves a valuable purpose, especially in regions of the world where incomes of the average worker is low.

The enormous cost of developing innovative drugs to market approval – $2.6 billion (Tufts CSDD Cost Study, 2014) – requires a multinational or global approach in order for companies to recoup their investment. Hence local Chinese companies developing innovative products are looking to enter the EU and US markets.

4. What are some strategies they can take up to overcome any of these challenges?

Partnering is essential, we believe, to overcoming hurdles in global development and commercialization. Local Chinese companies can partner early in development with companies experienced with market access in the EU and US – obtaining the know-how and/or infrastructure needed for success.

It is possible for a local company to establish an in-house market access operation, but the time, the fixed costs and distraction from the core drug development work make such an undertaking inefficient and, we believe, a poor choice. Global contract research organizations (CROs) already have the knowledge Chinese companies need and represent the most effective, cost-efficient way for them to access global markets.

5. Are there other issues regarding China’s biopharma industry that should be considered?

One very important development is China-Taiwan cross-strait cooperation in the biopharma R&D field. It means that biopharma companies can do clinical trials synchronously in Taiwan and China, with data from the selected investigational sites below being mutually acceptable for registration purposes.

This change is the result of four years of negotiations. The Straits Exchange Foundation (SEF) of Taiwan and the Association for Relations Across the Taiwan Straits (ARATS) of China signed the “Cross-strait Cooperation Agreement on Medicine and Public Health Affairs” on December 21,2010, with the agreement becoming effective on June 26,2011. Based on the Cross-strait Cooperation Agreement, Taiwan and China re-started negotiations and reached consensus in August 2014, choosing these eight GCP-qualified investigational sites (i.e. hospitals) – four sites respectively from each side – for clinical trials from which data would be mutually acceptable for registration purposes.

This should reduce repetition of clinical trials in Taiwan and China and accelerate drug launches, with little time lag cross-strait. The mutually recognized investigation sites are shown in the following table.

Supporting materials:

  • In February 2015, Quintiles was named FORTUNE Magazine's 2015 List of “World’s Most Admired Companies”.
  • In March 2015, Quintiles announced that it had been named to one of America’s Best Employers and comes in third in the “Drugs and Biotechnology” category.
  • In April 2015, for the third time in the last four years, Quintiles has been named Best Clinical Research Organization (CRO) at the Vaccine Industry Excellence (ViE) Awards.
  • In October 2015, Frost & Sullivan has named Quintiles as its Asia Pacific Contract Research Organization Company of the Year.

Featuring Mr Ling Zhen, Head of Greater China, Quintiles

Ling Zhen
General Manager and Head of Greater China, Quintiles

Mr. Ling Zhen is the General Manager and Head of Greater China at Quintiles. He oversees the overall service offering and strategic growth of the business in the Greater China region.

Ling joined Quintiles in 2007, based at its global headquarter in North Carolina, where he led key programs structuring innovative resource-based and investment-based partnering solutions for global pharmaceutical companies.

Prior to Quintiles, Ling held key positions in the areas of portfolio management and business development, respectively at the US offices of GlaxoSmithKline and Eli Lilly.

Ling started his career as a strategy consultant in the Life Science Group of Ernst & Young Management Consulting in the US, where he advised leading pharmaceutical and biotech companies on mission-critical strategic and operational issues.

Ling received his Bachelor of Science degree from the University of Science and Technology of China and earned his MBA from the Kelley School of Business at Indiana University, Bloomington. Ling also holds a Juris Doctor (JD) degree from the Law School of North Carolina Central University and is a licensed attorney in the state of North Carolina in the US.

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