In November last year, the Financial Times discussed some of the characteristics of the transformation of the Chinese pharmaceutical industry at the “2018 Pharmaceutical & Biotechnology Summit” held in London. At the meeting, the host threw out a poll of “When do you think China might become an important influencer of medical innovation?” More than half of the audience thought it was 2025.
Behind this issue, it not only means that China’s growing market demand has become a driving force for medical innovation, but also implies that in this land of China, medical “aircraft carriers” such as Pfizer, Novartis and Roche will be born. Is China ready? In the view of Christian Hogg, CEO of Hutchison China Pharmaceutical Technology Co., Ltd., 2025 is still a conservative estimate.
Set sail on the new track
China’s rapidly changing regulatory environment is creating new tracks for pharmaceutical R&D companies and service providers such as CRO/CDMO. Hogg admits that China’s regulatory progress in recent years has surprised the industry. In order to expand the accessibility of medicines, the Chinese government has made far more reforms than the protectionism of local companies. This is reflected in speeding up drug review and approval, simplifying the approval process, accreditation of overseas clinical data, promoting the development of drug innovation and generic drugs, and strengthening the management and supervision of product life cycle.
Four years ago, the National Drug Administration (formerly CFDA) approved a clinical approval, which took about 10 months. Now, with the introduction of the clinical implied licensing system, it usually takes only 60 working days to get the approval. A few years ago, the country’s rigorous review of high-tech and infrastructure investment made it difficult for multinational pharmaceutical companies to carry out some business outside of China. At the same time, due to protectionist policies and a rough intellectual property system, some international pharmaceutical companies The company even considered withdrawing from China.
However, given China’s huge population base, its medical industry dividends have not been fully released (or even just started). Compared with other industries, the “big infrastructure” of the medical industry can be said to have just started. According to the wishes of the country, the various supportive medical infrastructures currently being built are designed to further expand the accessibility of medicines and medical services. Sex, let more patients benefit from this reform.
From the perspective of the payer, future payers will not only be reimbursed for medical insurance, but many commercial insurance companies are eager to launch various insurance payment services. This is enough to attract many foreign pharmaceutical companies to do business in China.
Therefore, whether it is a local innovative pharmaceutical company, a traditional generic drug company, or a multinational pharmaceutical company, including their upstream and downstream service providers, will set sail on the new track. Both Biotech and large pharmaceutical companies have the right to participate as long as they can meet the clinical needs of domestic patients. Even the upstream and downstream service providers of some pharmaceutical companies, in order to better serve their customers, will adhere to the principle of where the customer’s needs are and where the company will go. In particular, some multinational companies have significantly increased their interest in Chinese drug development activities, some have established new branches in China, and some even consider establishing clinical supply centers.
For enterprises, it is especially important in this era to accurately understand the ruling ideas of government departments and quickly adapt to changes in policies. An executive said in an interview that “although reforms have made China’s regulatory environment more acceptable to pharmaceutical companies, there are still barriers. These barriers include government-defined public health insurance plan price controls, national and provincial complexes. The price negotiation process, complex distribution channels, infrequently updated list of listed drug formulations, and the lack of GMP-compliant manufacturing test centers and clinical centers that meet GCP standards.”
Recognize that CRO turns into CRO+
Some reports pointed out that due to the increase in government preferential policies, the increase in research and development expenditures and the increase in the number of new drug approvals, China’s CRO industry will be further promoted. By 2021, China’s CRO industry will reach 116.5 billion yuan (US$17.1 billion). Among them, up to 29.2 billion US dollars in pharmaceutical R&D expenditure has greatly promoted the development of CRO industry from the supply side.
The biggest challenge facing Chinese CROs today is the lack of adequate clinical research infrastructure. Other challenges such as a limited number of clinical research centers, the lack of qualified PI and researchers, and inefficient institutional review board (IRB)/ethics committee (EC) processes.
Given the Chinese government’s support for drug innovation and the integration of China’s global drug standards, more and more domestic pharmaceutical companies plan to invest more resources and spend more on innovative drug development. Therefore, some CROs and pharmaceutical companies will start new businesses, such as launching clinical research and development programs, and provide some high-value training opportunities for researchers in clinical trial centers to strengthen the implementation of clinical trials.
It is not difficult to find that the traditional CRO model focusing on clinical trials has developed into a “CRO+” model in China. Behind the constant addition is to build a healthier ecosystem. Some common “additions” include CRO+ marketing data; CRO+ clinical laboratories; CRO+ contract manufacturing organizations (CMOs); CRO+ technologies (eg, AI, big data). The most obvious layout in this regard is WuXi PharmaTech, whose territory has not only been limited to the domestic, but also opened an international expansion plan.
Whether it is a Western CRO company like Jing Ding Medicine, IQVIA, Covings, or the local WuXi PharmaTech, Shanghai Medici, Hangzhou Tiger, etc., the competition is obviously increasingly fierce. As China continues to attract overseas pharmaceutical companies to expand their territories and capabilities in new drug research and development, China’s leading CROs, which have been at the forefront, have gradually become the preferred suppliers and important strategic partners of multinational pharmaceutical companies through years of accumulation and service.
In addition, as China’s regulatory authorities are also crossing the river by feeling the stones, the recommendations of key industry leaders (KOL) in some industries play a crucial role in the future direction of the entire industry. As more and more R&D companies want to penetrate this market, the demand for consulting services in the pharmaceutical industry will continue to grow. Some CRO companies even recruit experienced personnel from government departments (such as FDA, CDE) to become CRO+ consulting think tanks.
Further expand cooperation with CMO/CDMO
China’s demand for contract manufacturing services is growing, and biosimilars and innovative drugs are increasingly entering the clinical pipeline, but most of China’s early biologics developers lack production facilities. In China, for many people, “outsourcing to China means WuXi PharmaTech”.
Before 2016, domestic CROs rarely served related services for domestic innovative pharmaceutical companies. The global capital market is not very optimistic about China’s CRO industry. In addition, there are some regulatory frameworks at the time that prevent third-party/CMO from conducting clinical trial samples or commercial production.
However, by 2016, China established the Drug Listing License Holder System (MAH). This system model derived from the Western drug licensing and production license separation management allows companies with pharmaceutical production approvals to choose to produce drugs themselves or Is looking for CMO foundry. Some industry insiders pointed out that the MAH system is likely to become an industry license before and after 2020.
The Baekje Shenzhou PD-1 drug, which was founded by Boehringer Ingelheim, is a model of the MAH system. In 2017, Boehringer Ingelheim established four bio-pharmaceutical production lines with a 2000-litre disposable bioreactor, and is reported to be the first multinational company in China to establish a CMO project that meets global standards. In January 2018, Baekje Shenzhou announced that its solid tumor therapeutic drug PD-1 antibody, tislelizumab, will be the first monoclonal antibody (mAb) produced at the Boehringer Ingelheim Shanghai plant, which will also be the first foreign CMO. Drugs produced in China.
Rationally look at risks and rewards
A report by LEK Consulting, “Towards the East: Biopharmaceutical International Expansion to China and Asia” pointed out that the top four countries in global pharmaceutical spending in 2017 were US$467 billion; China’s US$123 billion; Japan’s US$85 billion Germany has 45 billion US dollars. The report also predicts that by 2022, these figures will be $600 billion, respectively; $160 billion; $87 billion; $56 billion.
In just a few short years, China has quickly become the world’s second largest biopharmaceutical market from the emerging pharmaceutical market. While many people are aware of the opportunities that exist in the market, the challenges and obstacles are not necessarily clear. For example, there are too many changes in regulations, and it takes time to digest and absorb and implement them.
Sino-US trade war, new regulations, longevity incidents, black swan incident forced top-level design reform. China’s intellectual property issues are receiving increasing attention, and stronger legal practices have once again solved this problem. Changes in innovation, regulation, intellectual property and financing rules are not overnight phenomena, many initiatives have continued and are now accelerating from these new market forces.
Even the top experts in the industry have little time to try to find that the speed of NMPA’s future approval of drugs will be consistent with the speed approved for national insurance. Will the Chinese government, like the Trump administration, adopt a “quantity-for-price” model that increases the number of approvals in exchange for price cuts for listed drugs.
But what is certain is that the return of innovative talents is not only a trend, but also a force. Ten years or even twenty years ago, the wanderer who crossed the ocean to study on the other side of the country is now returning to China with skills, knowledge and entrepreneurship. Their commitment has spawned the future of the Chinese pharmaceutical industry. They are also the leaders of the new roads of Chinese pharmaceutical companies.