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Medicines: China wants to become a global powerhouse in the pharmaceutical industry

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In China, Western pharmaceutical multinationals still have a bright future ahead of them. But beware of the local industry, which no longer wants to confine itself to subcontracting and generics, but is in turn banking on quality and innovation. With a local pharmaceutical market estimated at 106 billion euros in 2017, China is the world's second largest pharmaceutical market behind the United States, with growth from 6% to 10% per year expected by 2022, according to the research firm Iqvia.
 
Dn the top 10 of the prescription drug market, the top ten are Pfizer of the United States, AstraZeneca of the United Kingdom, Sanofi of France and Bayer of Germany. However, the market share of multinational pharmaceutical companies is relatively small: 20% in volume, 25% in value.
 
The bulk of the Chinese market remains the prerogative of local groups, largely unknown outside the country's borders such as Yangzijiang, Jiangsu Hengrui, Qilu...
Some are no longer hiding their global ambitions. Fosun Pharma, for example, last year took control of the Indian generics group Gland Pharma for more than a billion dollars, and has plans for Southeast Asia and Africa.
"The pharmaceutical sector is a key investment sector for China (...). And the speed at which local firms are improving is quite impressive," comments Tony Ren, an analyst at Kim Eng Securities in Hong Kong, interviewed by AFP.
 

The return of the "sea turtles"

From subcontractors dedicated to the production of active ingredients for chemical drugs, local players have become generators. Then they started copying innovative medicines, and now they want to become innovators in their turn.
 
The Chinese government is supporting the move upmarket, aiming to catch up with the public health levels of developed countries by 2030, but without recklessly inflating its imports and spending.
 
Measures to improve the quality of "made in China" medicines, to strengthen patent protection or to speed up the marketing of new drugs: the Chinese authorities are "doing everything possible to promote an innovative local biopharmaceutical industry", Christian Hogg, managing director of Chi-Med, a Shanghai biotech listed on the Nasdaq, told AFP.
 
Thousands of Chinese researchers based and trained abroad, especially in the United States, have also returned home in recent years, attracted by new opportunities in China and incentives from Beijing. In the country, they are poetically called "sea turtles".
Of the more than 400 Chi-Med scientists in Pudong, "more than 50 are Chinese returnees from abroad, and they help train our local talent," Hogg said.
 

Scandals and Trade War

While all observers note that developments are moving in the right direction, the picture of health in China is still far from rosy. The system is characterized by a regulatory patchwork, overcrowded hospitals and a shortage of doctors, especially in the more rural provinces. Practitioners are also notoriously underpaid and thus more exposed to corruption.
 
"Doctors are looking for ways to make ends meet, typically by accepting benefits from pharmaceutical companies.... And when it's +cash+ it becomes very problematic," confided to AFP an expert in the sector who wishes to remain anonymous.
 
A few years ago, a huge corruption scandal in China splashed the British laboratory GSK, which in 2014 was fined a record 3 billion yuan (nearly 400 million euros at the time) by a Chinese court.
Today "multinationals behave better, but local companies can be very aggressive" when it comes to corruption, the expert slides.
 
Problems with the quality of local medicines are also recurrent, prompting patients to resort to imported products when they can afford them.
A major scandal involving faulty vaccines from manufacturer Changchun Changsheng shocked the country this summer. At the same time, potentially carcinogenic impurities were discovered in an active ingredient manufactured by other Chinese laboratories, valsartan, leading to drug recalls around the world.
 
As for the trade war with the United States, it does not seem to affect the Chinese pharmaceutical market for the moment, but the threat is there.
This could ultimately hinder the local development of therapeutic innovation, by depriving China of the American source of new molecule discoveries, and compromise the partnerships of local players with American groups, says Tony Ren.
"But the reverse is also quite possible: it could expose US pharmaceutical companies to retaliation by Chinese authorities, and thus speed up the process of import substitution," says the analyst.
 
Source: AFP
 

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