Even as the rapid growth of the Chinese pharmaceutical sector is increasingly luring western companies,a new tougher approvals policy for pharmaceutical products in China will bring more opportunities for western contract companies by helping domestic firms to meet the strict new rules, say industry experts. SFDA is introducing a tough new approval procedure for new pharmaceutical products based on the FDA system.
Moreover the Chinese government's pledge to invest $125 billion in health care services to extend basic health care to 90 per cent of the population offered massive opportunities not just for contract service providers but drug manufacturers too, they point out.
Western pharmaceutical companies such as Roche, Pfizer and Lilly are already well-established in China. While Roche currently has the top sale revenue of $1.38 billion,the second-largest western revenue earner Pfizer employs about 9,000 people in China at nearly 200 locations.
In total, 1,475 international firms operate in the Chinese pharmaceutical sector, either alone or in partnerships with local companies, compared with about 6000 domestic players. Non Chinese companies currently account for just over 30 per cent of the sector’s total revenue.
Western companies, particularly US firms, were well placed to significantly grow their presence in the US market. There are huge opportunities for US manufacturers to provide products and services to these people, say market experts.
The Chinese government’s investment in health care services will underpin significant growth of the nation’s pharmaceutical sector and bring a wealth of opportunities for western companies, said a spokesperson of China State Institute of Pharmaceutical Industry.
Over the next year, the government plans to invest a further $125 billion in health care reform following the $850 billion invested over the past two years, he added.
“China is already the third largest pharmaceutical market in the world. This year total revenue is expected to increase by 23 per cent to reach $154 billion.”
At present, health care spending accounts for only 4.6 per cent of China’s Gross Domestic Product (GDP) compared with top spender, the United States which invests 15.3 per cent and Denmark which spends 10.8 per cent on health care. But, China’s investment is set to rise significantly under China’s latest five-year plan covering the years 2011 to 2015.
China’s aging population is a particularly lucrative market for western pharmaceutical companies. Within four years, 140 million Chinese will be aged 50 or over compared with about six million who are aged 65 or over today.
Migration of people from the country to urban and semi-urban areas would also help to drive the sale of pharmaceutical products, he said.
The largest drug categories in order of priority were antibiotics, cardiovascular, diabetes, neurological conditions, including depression, GI diseases and finally cancer drugs.
“The Chinese population has a strong bias in favour of FDA (Food and Drug Administration) approved products.” This helps US products win approval from SFDA, the Chinese regulatory system, and offers a compelling selling point compared with output of low-tech, inefficient domestic pharmaceutical companies, he said.
SFDA is introducing a tough new approval procedure for new pharmaceutical products based on the FDA system.
Since many domestic firms will be unable to comply with the strict regulatory requirements, they will be forced to seek help form western outsourcing companies or face closure, he said .
The Chinese regulatory body, the SFA is working in co-operation with the US Food and Drug Administration (FDA) to introduce a US-style approvals system in China, said an analyst. The new standards would force some Chinese companies out of business because they cannot provide large-scale process development unless US contract companies assist them, he added.
The new Chinese regulations emulate the FDA approvals system including large-scale process development, large clinical trials, GMP and testing. Their aim is to provide a more transparent system which results in more consistent, higher-quality products, he said.
Of the 7,467 pharmaceutical companies operating in China, 5,989 are domestic firms and 1475 are international companies, acting either alone or in joint venture agreements with Chinese companies.
Domestic firms earn $89.6bn year or 68.9 per cent of total revenues, he pointed out.
Much of the domestic pharmaceutical industry is characterised by small to medium-scale businesses which lack innovation and research and development expertise. At present the domestic drugs are low to medium quality compared with imported drugs. The domestic products are mostly generic, low-tech with low standardisation. Hence the Chinese companies find it hard to compete in the world market.
The government is pushing to advance the Chinese pharmaceutical industry, he said
He listed the largest drug markets in China, in order to sales, as antibiotics, followed by, cardio-vascular, diabetes, neurological conditions including depression, GI diseases and finally cancers.
In the meanwhile according to legal company Bird & Bird, China's new rules on Good Manufacturing Practice is likely to drive consolidation among the country's 5,000-plus pharmaceutical companies.
The new GMP rules came into effect on March 1, 2011 significantly elevates GMP standards in China said a spokesperson of the company.
As elevated standards under the new GMP mean higher manufacturing costs for drug companies, it will benefit big drug companies with resources, particularly those who have already adopted higher GMP standards, whereas many smaller companies will likely be eliminated, they note.
The new rules place greater emphasis on the use of effective quality control system by pharmaceutical companies, through the strengthening of drug manufacturing quality management systems.
The new GMP also introduces the concept of quality risk management, and includes a number of significant changes including an increase in employee quality requirements and refinement of China's document management rules to encourage the use of standard operating procedures (SOPs) and manufacturing records.
The updated rules also include new processes and measures for supplier audits, change control, more secure approaches for procurement of excipients and other raw materials, and other measures designed to help prevent and correct quality failures.