“Made in China” has morphed into “Discovered in China” and, despite geopolitical tensions (most recently, sending jets to confront the Royal Canadian Air Force in international airspace, flying jets into Taiwanese airspace and demanding the U.S. halt trade talks with Taiwan), the pharmaceutical industry sees China as a land of opportunity and some largely surmountable challenges.
“China is making a significant effort to create an environment of innovation and a business climate in which regulations straddle the kinds of approvals and standards that exist in the rest of the world,” Maria Whitman, global head of ZS Associates’ pharmaceutical and biotech practice, told BioSpace. By creating a system that develops innovative medicines internally while allowing for supplementary innovation from the rest of the world, “China is working toward being a global player in the pharmaceutical market.”
But, as that nation’s internal capabilities have advanced, so have its restrictions on foreign involvement. Some see this as a way for China to reclaim its pharmaceutical industry from foreign interests. Others see it as the natural progression of a growing biopharma industry aligning itself with global regulators. Both may be true, in varying degrees.
The Administration Regulations on Human Genetic Resources is an example. Put into effect July 1, 2019, it regulates genetic resources and prohibits foreign entities from collecting, preserving and providing Chinese human genetics resources (and data generated through their use) except for the purposes of scientific research. That research, however, must be carried out through collaborations with Chinese entities and be approved by the Ministry of Science and Technology, according to an analysis by the law firm Morrison Foerster.
“What you hear on the ground from scientific innovators is that this makes it harder for scientists to collaborate…and for scientists inside China to publish in international journals that require them to submit articles with documentation and pooled datasets that may be accessed by others to run experiments,” Whitman said.
That said, privacy around genetic information is a point of discussion throughout the world, she continued. That particular regulation, she speculated, appears to be a product of the tension between the need of nations to “control the private information of their citizens and receive the benefit of innovation internally, while still allowing collaborations to exist.”
While China has issued a spate of regulations in recent years that affect the biopharma industry, Whitman called for perspective. “The U.S., for example, recently has had fuzziness around guidance related to data that was only harnessed in a Chinese environment.” In fact, the FDA failed to approve three drugs this year where clinical trials were conducted only, or mainly, in China, according to a Reuters report. “Every country wants to ensure that innovation will work for their populations,” she stressed.
Currently, China’s preferred drug list is evenly balanced between therapeutics developed in China and those emanating from the rest of the world, Whitman pointed out. The PD-1 drugs for cancer, however, are a different story. “China is approaching double digit numbers of approved PD-1s. Not included on that list are the PD-1s generated by Western manufacturers,” she said. From a development perspective, it appears that China is beginning to favor therapeutics developed in-country. “Last year, 50% of the drugs approved in China were novel. They were not ‘me-too’ drugs. Right now, 12% of the world’s R&D budget is in China.”
The question for multinational companies is how to access the Chinese market and patients. Some companies trying to build out their organizations within China say the biggest challenges are no longer regulatory. “The challenge – from the perspective of multinationals feeling comfortable – is about the talent.” Whitman listed the issues as retaining employees with the skills to help a multinational company succeed in China, and finding the right partnerships to co-promote and help the company expand there.
It’s not an easy endeavor. “I know a few companies that are still in ‘wait-and-see’ mode. They’re focusing on other emerging markets because it is daunting, commercially, to enter China,” she said.
Partnering with established Chinese companies was, and remains, the simplest way to access Chinese innovation and markets. Globally, “Innovation in biopharma is increasingly moving to partnerships and alliances. Between 50% and 80% of Western pharmaceutical companies’ pipelines come from emergent entities through acquisitions and alliances and then is developed, scaled and commercialized by big pharma,” Whitman noted. In such an environment, partnering with Chinese companies is a natural way to innovate and bring that innovation to the Chinese market and to the world.
“The pharmaceutical market is expected to grow about 3% through 2030,” Whitman said, “and China, with a large, aging population, represents a big chunk of that. Drugs that are on the national reimbursement drug list have an average price that is negotiated down 61.7%, but the volume potential is quite large.”
To that point, in 2021, pharmaceutical company revenue in China increased 18.7% from 2020, and profits increased 67.3%, according to China.org. Therefore, the value of that market is substantial, Whitman said, “even if it’s in an out-licensed capacity.”
For multinational pharmaceutical companies, China is, at least for now, both a land of opportunity and an increasingly formidable competitor.