As opportunities in developed markets saturate, India Pharma Inc is looking to optimise the growth potential in China. But what are the challenges ahead?
Rising competition among pharmaceutical players in the developed markets along with increasing isolationist trade policies by the US, is an indication for pharma payers to focus more on the emerging markets.
As a result, India Pharma Inc needs to look at newer markets to continue its growth trajectory. And, many believe that China, the second-largest drug market, could be the next land of opportunity as healthcare services in China is likely to see an overhaul with rising ageing population, cancer, obesity, COPD and high blood pressure.
According to GlobalData estimates, the Chinese pharma market is expected to grow from nearly $132 billion in 2018 to more than $209 billion by 2022 at a CAGR of 12 per cent.
Moreover, with policies like Made in China 2025 and Healthy China 2030, the Chinese are also trying to attract foreign companies to its soil to set up their base in the country. These measures are attracting global players, including India.
Companies like Dr Reddy’s, Sun Pharmaceuticals, Cipla, Strides Pharma, Aurobindo Pharma, Piramal Enterprises, Wockhardt, Alembic, NATCO Granules India, Claris Lifesciences, Syngene International, Ecron Acunova, Epsilon Clinical Research, KlinEra Corp India, SIRO Clinpharm, have already established its presence in China either in the form of joint venture (JV) or independent manufacturing capabilities.
Giving an overview of the market conditions, Anil Khanna, Partner, Wisdomsmith Advisors says, “The China – US trade war has opened an opportunity for the Indian companies to explore the Chinese market, wherein Indian export is very miniscule (not even $200 million). Sustained pricing pressure in the US market and US FDA giving priority approvals to ANDAs in the categories with lower competition, have reduced the exclusive period duration for commanding the pricing premium. Recent measures like Competitive Generic Therapy (CGT), which encourages more generic R&D investments in off-patent drugs and sharp decline in the approval timelines for generic ANDAs approval, with further decline in offing, are some of the reasons for Indian firms to venture into the China market.”
Likewise, China’s recently revised drug law, which removes drugs that are legal in foreign countries but not approved in China from the category of fake medicines, will also allow entry of Indian generic medicines in the country, thereby strengthening India Pharma Inc’s foothold .
Vijay Charlu, Vice President, Corona Remedies informs, “Out-of-pocket and private insurance healthcare payments rose steadily from 2007 at a CAGR of 13.5 per cent. Many multi-national players who have regarded China only as a source of raw materials or research are now contemplating an entry into the Chinese market. Others who have previously entered the market through joint ventures with Chinese companies and research institutes are now ready to ramp up their growth through drug licensing and acquisitions.”
Evolving regulations
China has also taken a number of regulatory developments to enable fast track approvals of differentiated high-quality generic drugs. These will have an impact on the Indian pharma players trying to venture into the China market.
As Charlu says, “As part of China’s 2018 government administration overhaul, the name of China Food and Drug Administration was changed to ‘National Medical Products Administration’ and merged into the newly-created state administration for market regulation to further optimise the medicine registration and approval process. Two months later, another guideline was issued on overseas clinical trials where innovative drugs are developed synchronously at home and abroad. Introduction of the two new policies is regarded as a symbol of further opening up the import market and generic drugs from India are likely to be benefitted.”
Peter Shapiro, Senior Director, Drugs and Business Fundamentals Healthcare, GlobalData informs, “In the recent past, China has introduced regulatory reforms such as the reduction of approval timelines and promoting cheaper generics usage through bulk procurement scheme. It will help foreign companies, especially the Indian companies, which are more likely to provide cheaper generics to grow their business in China. It will be mutually beneficial to both India and China. Indian pharma companies can increase their business in the region besides helping the Chinese healthcare to benefit from the lower drug prices and healthcare expenditure.”
Shapiro also highlights, “Creation of the National Medical Products Administration have encouraged generic pharma companies to mark its presence in the country by improving the speed of regulatory approvals and enhancing reimbursement plans for generics.”
He further informs, “This includes the ability of Chinese drugs to be produced by a company other than the Market Authorization Holder, leading to the possibility of a domestic contract manufacturing industry. However, restrictions requiring the final dose to be manufactured domestically in China exists. This requires Indian pharma companies to find local partners. Sun Pharmaceutical Industries and Cipla are entering China through local partnerships, as they seek new markets to sell their generic drugs.”
Cipla
Upadhye opines, “The government’s steps to reform the healthcare sector by expediting the pace of approvals by the regulatory board and offering better reimbursement plans for generics has made China an attractive opportunity for Indian generics companies.”
He further elaborates, “China has recently rolled out various policies that encourage the use of generics, which has proved beneficial for several companies entering the Chinese market.”
Khanna too highlights, “New regulations in China, which talks about fast-track approvals for products cleared by the US Food and Drug Administration, could help Indian companies secure a foothold in the market. Further, EU-approved Indian suppliers can be granted the industrial drug license in an expeditious manner so they can enter the Chinese market within six months.”
The story so far
India has been approaching China for a long period of time to open up its pharma market, which is facing pricing issues due to the rising incidence of cancer. Earlier, Executive Director of the Pharmaceuticals Export Promotion Council (Pharmexcil) of India had also stressed on initiating attempts to make formulations exports to China.
Regulators from both the countries recently met in Shanghai to find a suitable solution and to remove the roadblocks. Charlu informs, “Post high-level meeting of heads of the country last year, China has begun importing of rice, sugar and soybean from India, but there was no breakthrough on the pharma front, which is regarded as a ‘big ticket’ item. In the same meeting, India insisted that China should seriously consider importing more Indian drugs which are in demand from various countries including the US.”
Moreover, rising cost of healthcare has become a serious issue in China and a movie named ‘Dying to Survive’ was filmed based on the real-life story of Lu Yong, a Chinese leukemia patient who smuggled cheap but unproven cancer medicine from India for 1,000 Chinese cancer sufferers in 2004. The film showcased the need for more accessibility and affordability of medicines.
Upadhye says, “There was a lot of pop-culture-driven emphasis on the need for affordable generics after the release of ‘Dying to Survive’ last year. Healthy China 2030, the public health plan proposed by the government, is receiving much added attention to speed up modern healthcare uptake in the country, which includes new medicines.”
And India as one of the major providers of affordable medicines, is well poised to leverage this opportunity.
Growth potential galore
Khanna informs, “Antibiotics and respiratory are the two key therapies which companies are focusing on. The antibiotics market in China is double that of the US by value and is 25 times bigger in volumes. Respiratory is also another big category thanks to higher pollution levels in urban China. In addition to these therapies, anti-cancer therapy is also under focus. A few months back, China exempted import tariffs on 28 drugs, including all cancer drugs.”
Charlu says, “The Chinese government is under huge pressure from its public for high price of cancer and other generic drugs. No country can give such pricing benefits other than India along with quality, which is well known to China as well.”
Adding more insights on the growth opportunities in China, Upadhye says, “Some time back, China’s FDA outlined a plan to effect priority review for early generics, novel drugs for serious illnesses, products in short supply and medicines that have been approved in the US and European Union, or are undergoing review in these regions. At Cipla, while our core home markets remain our current growth anchors, we see China as a crucial part of our future roadmap, where our primary focus shall remain on producing respiratory products.”
He continues, “Considering President Xi Jinping’s vision to foster local manufacturing of medicines, consequent steps taken by the regulatory body to take this forward and create more opportunities for companies building the industry there, it is an excellent time to leverage the growth tide and grow along with the country. And given the size of the market and relevance of the industry, pharma will continue to play a significant role in China’s manufacturing goals, as laid down in ‘Made in China 2025’.”
So, what does it comprise and what does it offer Indian companies.
Made in China 2025
Made in China 2025 is a strategic plan issued by Chinese Premier Li Keqiang and his cabinet in May 2015. President Xi Jinping in order to counter the country’s dependency on foreign drug imports and to tap the revenue generated by the Chinese market, felt the urge to reinvest in t