Focused China Local Strategy Remains Key Despite Country's Joining ICH – Executives

Top China executives from Pfizer, AstraZeneca, GSK share their views on growing in China amid lingering challenges despite regulatory progress.

China's decision in May to join as a full member of International Council for Harmonisation, indicating a willingness to align with international standards, is likely to propel both new drug manufacturers and generics makers operating in the country over the long term, executives suggest. Even so, companies should not lessen their attention on many nearer-term challenges to getting drugs successfully on the Chinese market.

"Unlike before, when we are following the rules established by others, now we are participating in the rule-setting. With the input from China's perspectives, it [adoption of ICH] will significantly elevate both innovative new drugs and generics," Pfizer Inc.' s China GM Wu Xiaobin told attendees during China Healthcare Summit of Entrepreneurs, Scientists and Investors, held Sept 23-24 in Beijing.

GlaxoSmithKline PLC' China GM, Thomas Willemsen echoed the view. "China hopes to grow to become a market parallel to international market," he said at the same forum.

Still, market access challenges linger. Insufficient coverage, deep price cuts, lengthy battles for new drugs to gain entry to each of China's 31 provinces and slow process by hospitals to list these drugs continue to cast shadows for growth outlooks.

Building an innovation-enabling environment, which is key to convince the MNCs' global headquarters to prioritize the China market, includes not only regulatory streamlining, but drug pricing and a speedy hospital formulary entry, noted Willemsen.

"Now is the budgeting time again, when [local teams] communicate with the global HQ. Trust is a very important factor, vital to understanding certainty and the long-term planning." said the executive, who studied Chinese for a year at Sun Yet-sun University and is fluent in mandarin Chinese.

"Pharma R&D is getting riskier. The ICH move indicates China wants to return to [aligning with the international harmonization] track, which is very important for the local teams to convince HQs." He said.

Down To Villages

Feeling caught in between China's innovation drive and still stymied market access, the top executives of multinational drug makers say a focused strategy that maximizes strengths remains vital.

Such approaches include more targeted R&D, deeper involvement in county hospital markets, innovation in commercial models and nurturing of local talent.

Pfizer, for one, is among the fast-growing drug makers in emerging markets, up more than 7% in the quarter, but has seen its growth in China sluggish.

"Multinational drug makers are now looking to cut costs, and shift from before when they concentrated on mega and large cities and paid little attention to small cities and townships," noted Pfizer's Xiaobin, whose observations are particularly notable given his 15-year tenure as China GM.

To sustain growth, Pfizer is deepening its investment in the country's vast county hospital market for drug development, partnering with the China Cardiovascular Alliance to conduct diagnosis of hypertension and hyperlipidemia patients. The model integrates "checkup-diagnosis-treatment-disease management" components, and provides access to patients in the grassroots clinics.

The plan is to conduct 30 trials nationwide, and eventually expand to 80 sites, initially covering 150,000 and later 400,000 patients. Wu said the large-scale move is necessary to address the untapped lower-tier market segment.

Meanwhile, GSK has decided to close its China neurosciences center, and Lilly shut down its Shanghai R&D center, located in Zhangjiang Hitech Zone (Also see "GSK Closes China Neuroscience Center In Latest R&D Reorganization" - Pink Sheet, 3 Aug, 2017.).

Innovative Drugs, Talents

AstraZeneca PLC's China GM Feng Jie feels a bigger opportunity lies in innovative new drugs, not off-patented products, despite the latter's continued growth.

"The game rule is increasingly clear, new drugs have more opportunities, " Feng told attendees of the forum.

To that end, AZ has four new drugs lined up in China, among them, one for renal amimia is expected to be launched in China in the third quarter of 2018, the drug's first launch globally. AZ also has divested non-core assets to local companies including 3Sbio, and is focusing on growing respiratory and oncology products.

AstraZeneca illustrates a recent notable change: elevating local talents to leadership roles at multinationals. It appointed Feng as its China GM, after promoting Wang Lei as executive VP in charge of emerging markets.

Roche and GSK have also launched local talents programs. GSK's future leadership program is centered on sending promising Chinese young leaders for overseas training, and helping them to advance in their careers.

Going Global

While MNCs deepen their involvement in China's grassroots clinics, domestic makers look to enter international markets.

Luye Pharma Group Ltd., for one, has expanded its footprints to Germany via acquisition of Acino Holding AG, a transdermal patch maker, and development of products it plans to submit in the U.S. via 505 (b)(2) pathways, the streamlined path often used for example for new formulations of existing products. (Also see "Luye Looks To Horizons Beyond Pharma, China" - Pink Sheet, 16 Sep, 2016.) Keeping risks low and nurturing major products are ways to compete in overseas markets, Luye Chairman Liu Dianbo said.

To compete with MNCs, domestic makers must be focused, and go global, said Hao Xiaofeng, CEO of Kanghong Pharmaceutical Co. Ltd

China joining ICH ushered in a new era, a new opportunity that allows innovative drug makers to launch products faster, and domestics face steeper competition, said Zuo Min, Shanghai Pharmaceuticals Holding Co. Ltd. CEO.

"If the market were a football match, and we used to play in the Asia's Tier-2 league, now we are thrown into the World Cup matches oversight," Zuo said.