Page 342 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
country could dominate both as a maker and consumer. Innovation, however, must often include intellectual
According to health-care information company property rights. The international community has long
IQVIA, China was the world’s second-largest national criticized China for its lack of intellectual property rights
pharmaceutical market in 2017 — worth US$122.6 and protection. Things are changing in this regard as
billion. It was also the biggest emerging market for well. China made clear improvements regarding this
pharmaceuticals with growth tipped to reach US$145 issue in 2017, establishing three anchor points linking
billion to US$175 billion by 2022. According to DBS drug and patent, patent period compensation, and
analysts Mark Kong and Chris Gao, the development of data protection. Through this round of moves, China
China’s healthcare industry is still in its infancy, evidenced is slated to build a scientific and systematic protection
by its low healthcare expenditure as a percentage of mechanism to effectively protect the patentee’s
GDP and a smaller percentage of its population aged 60 legitimate rights and interests. These improvements
and over. That implies plenty of room to grow because have also driven the pharmaceutical investment market.
as the population ages, the demand for medicines will After 10 years of domestic medical development, China’s
increase. There is plenty of room for growth even though pharma industry reached US$571 billion by 2016 and is
the Chinese pharmaceutical market’s compound annual expected to grow into a whopping US$1 trillion industry
growth rate from 2013 to 2017 was 9.4 percent. China by 2020. According to the Annual Report on China’s
already has ambitions for exporting generic medication. Equity Investment in 2017, there were a total of 9120
Chinese pharmaceuticals obtained US Food and Drug investment cases in China, of which 1008 were related
Administration approvals for 38 generic drugs in 2017, up to the biotech and pharmaceutical industry. In terms of
from 22 such approvals in 2016. Furthermore, President investment number, biopharma is second only to the
Xi Jinping identified the pharmaceutical sector as one Internet and IT sector. In terms of investment volume,
to push as part of Beijing’s Made in China 2025 industry it is ranked fifth in all industries, with a total of US$11
plan. Still, there’s a long way to go. China’s largest listed billion. Among the investment firms, C-Bridge Capital,
pharmaceutical company, Jiaangsu Hengrui, has a market Tasly, Temasek Holdings, Shenzhen Capitol Group are
capitalization of US$35 billion — about a 10th of Johnson the most active (Zhang, Four Key).
& Johnson’s (Tan).
The new policies also come with a price. China’s
China Food and Drug Administration (CFDA) fragmented pharmaceutical industry is expected to
issued a series of supportive policies to encourage undergo a wave of consolidation over the next five
innovation in medicines and medical devices in 2017. years, thanks to more stringent drug quality regulations
They included Encouraging and Accelerating the and a reduction in layers of distribution intermediaries.
Listing and Approval of Innovative Medical Devices According to Credit Suisse’s head of China health care
and Medicines, Encouraging Medical Device and research, Serena Shao, the new policies could see over
Medicine’s Innovation and Reform of Their Clinical half the nation’s 2,900 or so small domestic drug makers
Trail Management, Encouraging Medical Device and disappear, with some acquired by larger rivals for a
Medicine’s Innovation and the Implementation of song. “For the smaller generic drug makers that did not
Medical Device and Medicine’s Life-cycle Management, comply with tightened quality standards, the value of
Encouraging Medical Device and Medicine’s Innovation their assets could be limited since many do not have
and the Patent Protection of Innovators, and Deepening the financial muscle to re-conduct clinical trials on their
the Reform of the Examination and Approval System products to fulfill regulatory requirements.” It can cost
to Encourage the Innovation of Medical Devices and over 10 million yuan (US$1.56 million) to go through
Medicines. This series of initiatives is aimed at carrying trials and procedures to obtain regulatory approval for a
out a comprehensive reform of six major aspects: drug. Mainland pharmaceutical firms’ average research
clinical trial management of medicines and medical and development spending was less than 5 percent of
devices, examination and approval of the listing, drug sales, compared with around 20 percent in the US. About
innovation and development of generic drugs, life cycle 95 percent of the nation’s 189,000 drugs registered are
management, technical support, and leadership. They generic ones, in an industry worth over 500 billion yuan.
are expected to greatly accelerate the approval process The top 10 players took up just 10 percent of industry
and enhance the efficiency of innovative transformation. sales in 2016, compared with 48 percent in the US. The
342
country could dominate both as a maker and consumer. Innovation, however, must often include intellectual
According to health-care information company property rights. The international community has long
IQVIA, China was the world’s second-largest national criticized China for its lack of intellectual property rights
pharmaceutical market in 2017 — worth US$122.6 and protection. Things are changing in this regard as
billion. It was also the biggest emerging market for well. China made clear improvements regarding this
pharmaceuticals with growth tipped to reach US$145 issue in 2017, establishing three anchor points linking
billion to US$175 billion by 2022. According to DBS drug and patent, patent period compensation, and
analysts Mark Kong and Chris Gao, the development of data protection. Through this round of moves, China
China’s healthcare industry is still in its infancy, evidenced is slated to build a scientific and systematic protection
by its low healthcare expenditure as a percentage of mechanism to effectively protect the patentee’s
GDP and a smaller percentage of its population aged 60 legitimate rights and interests. These improvements
and over. That implies plenty of room to grow because have also driven the pharmaceutical investment market.
as the population ages, the demand for medicines will After 10 years of domestic medical development, China’s
increase. There is plenty of room for growth even though pharma industry reached US$571 billion by 2016 and is
the Chinese pharmaceutical market’s compound annual expected to grow into a whopping US$1 trillion industry
growth rate from 2013 to 2017 was 9.4 percent. China by 2020. According to the Annual Report on China’s
already has ambitions for exporting generic medication. Equity Investment in 2017, there were a total of 9120
Chinese pharmaceuticals obtained US Food and Drug investment cases in China, of which 1008 were related
Administration approvals for 38 generic drugs in 2017, up to the biotech and pharmaceutical industry. In terms of
from 22 such approvals in 2016. Furthermore, President investment number, biopharma is second only to the
Xi Jinping identified the pharmaceutical sector as one Internet and IT sector. In terms of investment volume,
to push as part of Beijing’s Made in China 2025 industry it is ranked fifth in all industries, with a total of US$11
plan. Still, there’s a long way to go. China’s largest listed billion. Among the investment firms, C-Bridge Capital,
pharmaceutical company, Jiaangsu Hengrui, has a market Tasly, Temasek Holdings, Shenzhen Capitol Group are
capitalization of US$35 billion — about a 10th of Johnson the most active (Zhang, Four Key).
& Johnson’s (Tan).
The new policies also come with a price. China’s
China Food and Drug Administration (CFDA) fragmented pharmaceutical industry is expected to
issued a series of supportive policies to encourage undergo a wave of consolidation over the next five
innovation in medicines and medical devices in 2017. years, thanks to more stringent drug quality regulations
They included Encouraging and Accelerating the and a reduction in layers of distribution intermediaries.
Listing and Approval of Innovative Medical Devices According to Credit Suisse’s head of China health care
and Medicines, Encouraging Medical Device and research, Serena Shao, the new policies could see over
Medicine’s Innovation and Reform of Their Clinical half the nation’s 2,900 or so small domestic drug makers
Trail Management, Encouraging Medical Device and disappear, with some acquired by larger rivals for a
Medicine’s Innovation and the Implementation of song. “For the smaller generic drug makers that did not
Medical Device and Medicine’s Life-cycle Management, comply with tightened quality standards, the value of
Encouraging Medical Device and Medicine’s Innovation their assets could be limited since many do not have
and the Patent Protection of Innovators, and Deepening the financial muscle to re-conduct clinical trials on their
the Reform of the Examination and Approval System products to fulfill regulatory requirements.” It can cost
to Encourage the Innovation of Medical Devices and over 10 million yuan (US$1.56 million) to go through
Medicines. This series of initiatives is aimed at carrying trials and procedures to obtain regulatory approval for a
out a comprehensive reform of six major aspects: drug. Mainland pharmaceutical firms’ average research
clinical trial management of medicines and medical and development spending was less than 5 percent of
devices, examination and approval of the listing, drug sales, compared with around 20 percent in the US. About
innovation and development of generic drugs, life cycle 95 percent of the nation’s 189,000 drugs registered are
management, technical support, and leadership. They generic ones, in an industry worth over 500 billion yuan.
are expected to greatly accelerate the approval process The top 10 players took up just 10 percent of industry
and enhance the efficiency of innovative transformation. sales in 2016, compared with 48 percent in the US. The
342
