All Eyes on China Drug Safety

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Targeting these conditions is a path well trodden by Western boutique pharma firms as well as a clutch of smaller foreign-invested players operating in China.

Dr Christopher Savoie, chairman and CEO of Japan-based pharma firm GNI, points to two US companies - Vertex and ViroPharma - that are both working on treatments for Hepatitis C. He doesn't believe they would be investing so much if they didn't have an eye on marketing the drug in China, where the disease affects up to 15% of the population.

"In the US, hepatitis treatments would be considered a niche market but that doesn't mean to say there aren't a lot of people in the world who wouldn't welcome new drugs," he said.

FILLING THE GAPS
GNI itself, which was scheduled to make its trading debut on the Tokyo Stock Exchange on August 31, has always focused on treating Asian conditions with a view to filling gaps in the market that traditionally Western-oriented Big Pharma does not. Using processes that allow it to reverse engineer cells and develop treatments based on how specific genes interact, GNI currently has drugs for lung inflammation and liver damage in clinical and preclinical development.

"In the past, Western pharma companies have not really cared about the Asia market but this is changing," Savoie said.

"They think that the big market is Europe or the US; we have taken a contrarian view. We decided to go after a market where there is 30% quarter-on-quarter growth and, after that, maybe there is also a market for the drug in the US."

For foreign pharma firms in China, developing the right product is just part of the challenge. The fragmented distribution system means that getting the product to the customer is not easy.

"We have people asking us, 'How do I get my representatives when the sales force turnover in China is 30%?'" said Hill. "The whole supply chain side of things is very complex."

The situation is further complicated by the current drive to expand into tier -two and three cities. Companies have to promote their products to hospitals, pharmacies and wholesalers in scattered regional markets where the level of wealth and medical information is far removed from Beijing, Shanghai and Guangzhou.

Zuellig Pharma runs supply chains for companies that are not able to do it themselves but Zwisler admits there are limits to what the company can achieve.

"We operate to international standards but as soon as something leaves our hands we can't guarantee these standards will be enforced. Even in retail pharmacies in Hong Kong, you see drugs stored in rooms that are not air-conditioned. How can you control that?."

THE BIG PICTURE
Just like the concerns over domestic drug manufacturers, these logistics issues will ultimately be resolved as part of a wider discussion on the structure of health care in China.

The decline of the welfare state has left the majority of people without any health insurance. Ministry of Health figures show that, in 2004, 54% of all health care costs were met by the patients themselves. In 1980, when 90% of the population had some form of insurance cover, this was just 23%.

"Creating a functioning private insurance scheme or a NHS-style, state-funded model is critical," said Hill. "It is central to a well functioning society."

Foreign pharma firms have a vested interest in helping Beijing find a workable solution as it will have an impact on their own business plans.

Yet it remains unclear how such a system would operate - such as the balance between tax-linked, social insurance and private insurance contributions and whether it will be centrally or regionally managed - and Zwisler doesn't expect an answer to come soon.

"Health care will be a never-ending debate in China," he said.