China: making the most of global pharma opportunities

Sy Chyi Yeoh

Pharmaceutical organisations in China are increasingly looking overseas due to changes to the country’s domestic market policy[1] and improvements in drug traceability, accountability, quality management and so on[2]. The Chinese Government also offers abundant support to home-grown businesses that invest in external markets.

The local market, too, continues to grow at a fast pace, with China now positioned as the world’s second-largest pharma market after the US, a market set to be worth $300.9 billion by 2025 and enjoying a compound annual rate (CAGR) of over 12%[3]. With the domestic market also moving from traditional generic medicines to more innovative therapies, pharma firms are keen to capitalise on the global opportunities for these targeted offerings.

However, there are practical issues to weigh up for Chinese firms that want to expand overseas. For instance, should they set up proprietary operations in their target markets, partner with on-the-ground sales representatives, or purchase local companies? What is the best way to navigate the EU’s diverse compliance provisions? And which country should they choose as their base?

Speedier ROI

Interest in China from overseas pharma companies is also substantial. In 2020, the National Medical Products Association (NMPA), China’s pharma regulator, approved 48 new drugs, 20 of them domestic. This indicates that there is high demand for new drugs in China, plus burgeoning new drug development.

China joined the ICH in 2017 and adopted a marketing authorisation system very like that in Europe, plus it increased its pharmacovigilance (PV) activity, and it is also reducing time to market for overseas drugs sold in the country. For overseas pharma companies, that expedited ROI makes China increasingly attractive.

Risk reduction

There are opportunities on both sides but pharma firms need to reduce its risk exposure when entering new markets.

The usual approach is to hire a global or local Contract Research Organisation (CRO)/outsourced service provider with an understanding of local market dynamics and that can bridge the gaps in regulatory knowledge. Here, the United States benefits from having English as its dominant language, plus a single regulator in the shape of the Food and Drug Administration (FDA).

Brexit fallout

Europe presents more of a challenge for Chinese pharma companies. Post-Brexit, the UK no longer offers a natural bridgehead to the EU and Germany has now taken the lead as Chinese companies’ preferred destination, aided by its fairly transparent regulatory environment.

Drug requirements across the EU are harmonised by the EMA, but each separate nation still sets its own local requirements, making the situation complex even without the diverse cultural make-up and multiple languages of the 27 member states.

Companies expanding into Europe for the first time need to manage requirements and registrations right across the different markets within budget and this is where CRO support can prove crucial. The EU has the highest quality and safety standards in the world, so if a company can meet European standards, it is well placed to succeed in other markets.

Renewed potential

China currently produces about 40% of the world’s active pharmaceutical ingredients (APIs) and external markets such as Europe offer Chinese firms a larger market for APIs and generics. Here, a Chinese company might choose to adapt an existing product for sale in the EU, relocate its manufacturing base, or form a local sales partnership with a European brand.

From the European side, now that China’s authorisation process is more akin to that in the EU, European pharma companies can look to the country as an additional market for their already-established products – especially if these drugs are considered high value in China.

Collaboration

Collaborations are proving increasingly popular, with Pfizer[4] having already established a joint venture in China to co-develop new products. Meanwhile, Chinese pharma companies are gaining a foothold in Europe by buying entire pharma SMEs, or manufacturing facilities[5] in Europe. Some Chinese pharma companies are also investing in European biotechs[6] to stay ahead of the competition in China.

Finding a suitable partner

When moving into a new market, finding the right kind of independent help isn’t always simple. For example, global CROs may charge weighty fees, but few large service organisations have specialist capabilities as deep in China as elsewhere and paying substantial fees for generic help is not something that most pharma companies can afford. Having access to deep, specific knowledge of both Chinese pharma and external markets – especially Europe – will be essential to obtain the best outcome for all parties involved.

As a final note, speed isn’t not always of the essence here: patience can also be rewarded. If pharma companies take care to build relationships and consider every opportunity, they stand to gain the greatest benefits from their new ventures.

References

[1] “4+7” Drug procurement reform in China, China National Health Development Research Center, March/July 2019: https://www.cgdev.org/sites/default/files/CGD-procurement-background-china-case.pdf

[2] Major Changes in the Newly Revised Drug Administration Law, China Law Insight, August 2019: https://www.chinalawinsight.com/2019/08/articles/healthcare/major-changes-in-the-newly-revised-drug-administration-law/

[3] Latest patent reforms to further bolster innovative pharma research in China, GlobalData, June 2021: https://www.globaldata.com/latest-patent-reforms-bolster-innovative-pharma-research-china-says-globaldata/

[4] Pfizer and LianBio Announce Strategic Collaboration to Expand Development of Novel Therapeutics in Greater China, Business Wire, November 2020: https://www.businesswire.com/news/home/20201119005290/en/Pfizer-and-LianBio-Announce-Strategic-Collaboration-to-Expand-Development-of-Novel-Therapeutics-in-Greater-China

[5] Chinese pharma firm to acquire Swiss production facility (Bristol Myers Squibb selling Swiss medicine production facilities to Chinese company WuXi STA), February 2021: https://www.swissinfo.ch/eng/chinese-pharma-firm-to-acquire-swiss-production-facility/46338654

[6] Vivoryon Therapeutics and Simcere Announce Strategic Regional Licensing Partnership to Develop and Commercialize N3pE Amyloid-targeting Medicines to Treat Alzheimer’s Disease in Greater China, Vivoryon Therapeutics, June 2021: https://www.vivoryon.com/vivoryon-therapeutics-and-simcere-announce-strategic-regional-licensing-partnership-to-develop-and-commercialize-n3pe-amyloid-targeting-medicines-to-treat-alzheimers-disease-in-greater-china/