All Eyes on China Drug Safety

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These developments are taking place while the US$670 billion global pharma industry is struggling to regain momentum, dragged back by a US market that IMS believes could see negative growth in the fourth quarter of 2007.

By comparison, China's pharma industry has nearly tripled in size since the start of the decade. Spurred by strong economic growth and a richer, older and more urban-focused population, IMS calculated the market was worth US$13 billion last year and is set to reach up to US$25 billion by 2010.

The 25-30% growth rate posted so far this year hasn't been seen since the early part of the decade, which industry watchers put down to rising government investment. Although generic drugs account for three quarters of the market, a lot of the gains have been made by MNCs.

Zwisler suggests that Beijing's anti-corruption drives have steered doctors away from prescribing risky drugs towards more reliable MNC products, while price reductions on a general level have hit generic manufacturers hard. Tighter controls have also been placed on hospital spending and, while demand for generic drugs isn't falling, the market model has been tweaked in favor of MNCs.

"Hospitals are now limited to just two brands for a particular pharmaceutical chemical compound," said Zwisler. "This tends to be the MNC that created the original and one generic manufacturer."

THE PRICE IS RIGHT
The sense is that, after a few years of difficulty, Big Pharma has turned the corner. It is still in its very early days but it appears that higher-end drugs are finally realizing their market in China.

To illustrate that it is possible for high-priced patented drugs to be successful, Hill points to Glivec, a leukemia drug made by Novartis, and Iressa, AZ's lung cancer treatment. A course of Glivec had a retail price of around US$19,000 in 2005, three times that of Iressa. Yet Glivec still posted sales in China of US$29.6 million to Iressa's US$31.2 million. More than twice as many patients were on Iressa but the potential market for the two drugs in China is roughly the same.

With the situation also improving in terms of the providing adequate protection for the intellectual property behind these drugs, it would appear that Big Pharma firms have even more reason to be bullish about their prospects in China.

BRAIN WORK
To this end, considerable investments are being made in R&D facilities in the country. While these centers do play well with the Chinese government, which could pay dividends for the companies' long-term strategies, the principal aim is to better serve the domestic market.

Last year, AZ said it would spend US$100 million over three years on R&D while Pfizer hopes that its total US$500 million investment in the country will see it launch 20 new drugs in China by 2010. Novartis built one of its five global R&D centers in Shanghai and, in June, GSK opened its own facility in the same city.

"What we are doing is setting up a global center for drug discovery, clinical development and global registration," said Zang. "Among other things, we will focus on therapeutic treatment and degenerative conditions. These are huge areas not just globally but also in China. There are many people with Parkinson's and Alzheimer's in Asia."

According to Hill, this is all part of a strategy that will give China more prominence in the firms' product portfolios.

"All the big firms are now looking at how they can take their global assets and tailor them to China," he said, noting how GSK customized its India product range and rose from nowhere to become the second-largest firm in the market.

A general trend in China is the shift from acute to chronic diseases, driven by an aging population and the encroachment of Western habits on traditional Chinese lifestyles. But there are also specific diseases - diabetes, hepatitis, lung and liver disorders, as well as certain cancers, notably those affecting the stomach and sinuses - that are more prevalent in China and Asia than in the West.