A new and simplified approval process is making it easier for foreign firms to sell pharmaceuticals and medical devices in China. This is a shift from the country’s previous requirement for separate trials, which discouraged and delayed the launch of new products by foreign pharmaceutical firms on the Chinese market. To be eligible for faster pharmaceutical authorisation, foreign firms need to include Chinese people in their international multi-centre trials (IMCTs). Jeroen Groenewegen, Amy Mao and Xu Meiying from China Policy argue that this new trial system changes China’s research and development (R&D) system with it having better access to international clinical data, research facilities, testing populations and investment.
Access to healthcare
This new approval process allows foreign pharmaceutical firms to launch first-in-human trials of pharmaceuticals in China. It allows China at the earliest stage, namely phase I, to focus on dosage and side-effects before moving on to larger-scale phase II and III clinical trials. Pharmaceuticals that go through all these trial phases abroad can be sold faster on the Chinese market due to simplified marketing permit procedures. This will substantially reduce development delays, providing Chinese citizens better access to medical innovations.
China still lags behind developed countries in the quality of its pharmaceuticals, according to the State Council’s Opinions on Deepening Approval System Reform to Encourage Pharmaceutical and Medical Device Innovation, released 8th October 2017. Only 30 per cent of the 433 innovative pharmaceuticals (as opposed to ‘me-too’ or ‘me-better’ drug variants) that were launched worldwide between 2001–2016 gained approval for sale on the Chinese market, and those that were approved entered the market five to seven years after they were introduced in Europe and the United States (US) said Wu Zhen, the deputy director of the China Food and Drug Administration (CFDA), at a press conference. Policymakers hoped that domestic firms would make up for this gap, but unfortunately this does not seem to be the case. For instance, the slow approval of new treatments has contributed to the poor survival rate of Chinese cancer patients, says Southern Weekly, noting that China’s five-year survival rate in 2015 was only half the 2012 US rate.
Access to healthcare is a national priority and is the focus of Healthy China 2030, which seeks to increase average life expectancy to 79 by 2030, up from 76 in 2015. This policy was mentioned in the 19th Party Congress report, which also called for ensuring there is an adequate supply of pharmaceuticals. Ongoing healthcare reforms will halt pharmaceutical mark-ups in most hospitals before the end of 2017, severing the linkages between pharmacies and hospitals and introducing new pricing models that value the time specialists spend on patients over the type of pharmaceuticals they prescribe them. To mitigate the rising cost that reforms, extended healthcare coverage and an ageing population bring, the State has been promoting synergy between healthcare, pharmaceuticals and insurance firms. The State aims to drive down the cost of healthcare imports through collective bargaining. For instance, the National Health and Family Planning Commission (NHFPC) issued a call for companies to join high-value medical device price negotiations in September 2017.
The latest measures call for state-owned insurers to include new pharmaceuticals in basic insurance packages. This could potentially conflict with cost control because imports tend to be expensive. On the other hand, the measures call for medical institutions to use effective and reasonably priced pharmaceuticals, and the State will seek to force prices down with collective bargaining. These negotiations will affect the de facto availability and affordability of innovative pharmaceuticals for the majority of the population.
Even though the extent to which foreign pharmaceuticals will be covered by insurance is unclear, the new approval process makes it easier for multinational corporations (MNCs) to sell pharmaceuticals in China. The CFDA used to require a separate series of pharmaceutical trials to prove new drug safety and efficacy,
says Wang Lifeng, the director of the CFDA’s Pharmaceuticals and Cosmetics Registration Department. The new measures will cut down on red tape, for instance by allowing importers to hand in just two applications, one for international multi-centre clinical trials (IMCT) and one for marketing authorisation. Importers will also no longer need to have a marketing permit issued by the country its production is based in when they apply for participation in Chinese trials. To implement these changes, the Ministry of Science and Technology (MOST) released the Regulatory Streamlining for Collecting Human Genetic Resources for IMCTs’ on 26th October 2017, which will take effect 1st December 2017.
These measures have increasingly aligned China’s pharmaceutical policy with international practices. In June 2017, the CFDA became a regulatory member of the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH), next to similar institutions representing Europe, the US, Japan, Canada, Switzerland, Brazil and South Korea. In response, the CDFA remarked how becoming a regulatory member would steadily move China towards adopting internationally endorsed technical standards and pharmaceutical guidelines.
Internationalisation is intended to make China more attractive for pharmaceutical foreign direct investment. For instance, at the CFDA’s press conference, Deputy Director Wu cited insufficient resources as the principle reason for lagging behind other countries when it comes to innovation in the domestic pharmaceutical sector. In 2016, the total amount of Chinese pharmaceutical R&D investment was only US dollars (USD) 11 billion, a similar amount to what Swiss firm Hoffmann-La Roche’s R&D department invested last year alone. China would like to attract a larger portion of global pharmaceutical R&D investment, but the trend is moving in the opposite direction. In September 2017, GE announced it was transferring its Shanghai-based China Technology Centre’s basic R&D work to the US and India, while Eli Lilly and Company, GlaxoSmithKline, Novartis and others have also made major cutbacks to their Chinese research centres.
These companies’ recent moves to outsource R&D have increased international competition over these investments. For instance, India already develops and produces 20 per cent of global generic pharmaceuticals by volume and has a workforce that is at least as educated and affordable as China’s, but with better English. This adds urgency to Chinese government initiatives to improve regulatory frameworks and remedy problems with intellectual property (IP) protection.
To attract investment in pharmaceuticals, China needs to convince MNCs that it is a reliable place for international multi-centre trials (IMCTs). Foreign firms do not want clinical data they share with Chinese
partners and watchdogs to end up with competitors. They also do not want any clinical data that Chinese partners may contribute to pollute the results data and jeopardise the entire trial. Chinese government
agencies are currently attempting to address these concerns. Amendments to the Pharmaceutical Management Law, published for public comment on 23rd October 2017, proposed banning anyone caught for data fabrication in the pharmaceutical industry from operating for 10 years. It also seeks to improve data reliability with independent ethics and data-monitoring committees. The CFDA will improve IP protection by automatically checking applications to a patents database, so that potential IP conflicts can be identified and resolved before for instance a copycat pharmaceutical gets approved and marketed. Agencies will also offer patent holders reasonable compensation if the procedure caused them delays or otherwise infringed on their rights, and improve guarantees against submitted data being used commercially by others.
These steps align China with international practices, at least on paper. The CFDA announced stepping up training and oversight of its personnel, but because China has mostly developed generics for the domestic market, the organisation has limited experience with large, international trials of innovative pharmaceuticals.
China has tried to boost pharmaceutical innovation for years. At least five documents that the CFDA issued since 2009 called for simplifying and speeding up the evaluation of pharmaceuticals for rare diseases, the so-called ‘orphan drugs’. In 2015, policymakers centralised approval processes and unified standards and deadlines, with the State Council issuing Opinions on Reforming the Approval System of Pharmaceuticals and Medical Devices. Over the last three years the bottleneck has shifted from review and approval to clinical trial capacity, a senior pharma regulation expert told Southern Weekly. In response, the CFDA and NHFPC issued the Announcement on Biological Equivalence Trials in Clinical Trial Agencies, on 13th October 2017, which allowed 619 healthcare institutions to begin conducting clinical trials. Recently announced policies have gone further than ever before in remedying issues in the industry. Foreign pharmaceutical firms will benefit in the short run. State-owned pharmaceutical companies complain that these new policies only benefit foreign companies and will eventually give them free entry into the Chinese market. However, an anonymous expert involved in drafting the document told Southern Weekly that this new pharmaceutical policy will enable local pharmaceutical R&D to catch up to the US, Japan and Europe in the next five years. Exposure to international competition will cause many domestic firms to fail, but it will make the ones that survive that much stronger.
China Policy is a research and strategic advisory based in Beijing. Working with clients at leadership, executive, and research levels, they deliver clear insight into China’s policy world as it affects strategic and operational decision-making in China and around the world.