For China’s biopharmaceutical industry to achieve its potential, political and health leaders recognize a number of steps must be taken. Although the gap in upstream R&D between China and developed countries is narrowing, the gap in downstream industrialization and product commercialization remains wide. According to the BioPlan study, China must implement a number of critical steps to ensure its success in the world biopharmaceutical industry, including:
• Regulatory Reforms. Industry experts have called for more reforms on the healthcare insurance system, biopharmaceutical product approval, drug pricing policies, taxation policies, contract manufacturing policies, and the system for obtaining capital. These are critical to a favorable political environment for the industry.
• Government Funding and VCs. Despite the fact that the Chinese government is continuing to pour money into its biotech and biopharmaceutical sectors, overall investment remains relatively limited, ranging from a few thousands to hundreds of thousands of RMB for each project. In the past, this was sufficient for companies to establish a strong foothold and grow.
Today, however, some government-funded research projects have been cancelled mid-stream due to financial problems. China urgently needs to develop an effective VC market.
Currently, most VCs at home or abroad remain cautious of the Chinese biopharmaceutical industry because the country has not established an effective VC exit system. Under sometimes difficult circumstances, many Chinese biopharmaceuticals are trying hard to raise funds through domestic and international stock markets.
• IP protection. IP rights protection is the lifeline for a country’s biopharmaceutical industry. China has a short history of protecting IP rights here. Practical patent protection for pharmaceuticals was not available until January 1993.
Following China’s entry into the WTO in 2001, the government has been taking more serious measures to address IP shortcomings in accordance with TRIPS (Trade-related Aspects of Intellectual Property Rights). Today, IP protection status has been improved significantly in China.
However, the continuing existence of many biogenerics approved before 2001 still posts a challenge to many Western patent-holders. Under this circumstance, the only weapon to fight for their IP rights is international law. This past June, Pfizer won its patent protection lawsuit for Viagra in China, putting an end to a dozen Chinese companies producing the product as a generic.
• Innovation. Most Chinese biopharmaceutical companies realize the vital importance of establishing an in-house drug innovation program. As IP laws evolve that inhibit copying of foreign products, companies have listed innovation at the top of their agendas. Approvals of biogenerics have been restricted by the Chinese State Food and Drug Administration (SFDA) since 2005.
For the majority of Chinese biopharmaceutical companies with excess production capacity who have been producing biogenerics for years, innovation will be the only way they will survive harsh competition. For decades, universities and public research institutes have taken the core position in biopharmaceutical innovation. The government is beginning to encourage and support biopharmaceutical enterprises politically and financially and let them play a key role in innovation.
• Biotech Talent. China has a biotech talent pool with upwards of 20,000 research scientists. There is a growing number of “Hai Gui,” meaning Western-trained Chinese returnees who have stayed overseas for many years and acquired academic and commercial experience. These skilled workers are returning to China and taking important positions.
As a result, China is gradually catching up with the West. Today, some Chinese biopharmaceuticals founded by Hai Gui are recognizing the value of these “soft skill” assets. The industry should develop a supportive environment for them to use their talent.
• Outsourcing. The outsourcing industry is fueling the expansion of China’s biopharmaceutical segment. Chinese companies will benefit from outsourcing opportunities by tapping into some of the world’s advanced biotechnologies.
However, a number of major biological products such as vaccines and blood products are prohibited from contract manufacturing by the government. This may slow down the development of biopharmaceutical production outsourcing in China. The government should further relax restrictions on such outsourcing and give Chinese companies more freedom to perform on international stage.
China’s biopharmaceutical industry is beginning to exhibit the same strong growth that its other technology industries have achieved. However, it will need more than solid manufacturing skills. The complexity and regulated nature of this industry require a strategic integration of many components.
China’s biopharmaceutical industry should establish a solid development pattern taking into account the key factors of talent, innovation, management, IP protection, and capital. The ultimate goal for Chinese biopharmaceuticals is to enter the international markets.
As Chinese biopharmaceutical companies become a major force for innovation, and once they have managed their current industrial and regulatory bottlenecks, we believe China will become one of world’s major biopharmaceutical players over the next two decades.