Beyond political, cultural, economic, and linguistic concerns, the sheer pace of Chinese pharma’s development makes it challenging for international observers to fully grasp the sector’s intricacies, challenges, and numerous opportunities. Thankfully, in order to untangle this complex web PharmaBoardroom spoke directly to the heads of PhIRDA – the association representing the Chinese innovative industry – and RDPAC – which stands up for the concerns of multinationals operating in the country – to shed light on the five key industry trends to know today.
Chinese Innovation Sparking a Dealmaking Surge
Perhaps contrary to its reputation in some corners of the world, China is one of the world’s most innovative countries and Chinese biopharmaceutical innovation is already having a major impact on global health.
According to statistics from IQVIA, the rate of contribution to the global R&D pipeline by Chinese pharmaceutical companies increased from four percent in 2013 to 28 percent in 2023. The rate of contribution to global R&D by Chinese pharmaceutical firms has surpassed that of Europe and is second only to the United States.
This has led to a surge in in-licensing deals between cash-rich but innovation-poor global firms and Chinese pharmas, many of which have spent the past two decades developing cutting-edge medical treatments. In 2023 alone, Chinese biotech firms were involved in 240 life sciences licensing deals, marking a 50 percent increase from 2021. This included 70 out-licensing agreements with foreign companies, totalling over USD 35 billion.
This represents a reversal of the historic trend of Chinese companies buying in foreign innovation, as PhIRDA Chairman Professor Song Ruilin explains. “China’s pharmaceutical innovation is transitioning from a focus on licensing-in to producing more licensing-out opportunities after collaborative R&D, effectively going from technology buyers to sellers,” he says.
“Recently, MNCs like Pfizer, Novartis, and AbbVie have been collaborating with Chinese biotech firms. The abundance of these deals demonstrates the growing international capabilities of China’s pharmaceutical innovation on the global stage. Particularly in 2023, the value of licensing-out deals from Chinese companies, converted into US dollars, was approximately 2.5 times greater than the total capital raised by Chinese enterprises within China.”
“The surge in biotech licensing deals with Chinese biotechs reflects the country’s growing capacity for innovation,” adds Renaud Gabay, managing director of RDPAC. “Chinese biotech firms are developing cutting-edge research and leveraging shared labs and facilities, making them valuable partners for international companies. These collaborations are attractive because they offer a way to accelerate global cooperation. By partnering with Chinese biotechs, companies can facilitate the approval of drugs in China, benefit from the large market potential, and potentially export these drugs globally.”
MNCs’ Maintained Commitment to the World’s Second Largest Economy
China, as the world’s second largest economy, has long been an unignorable location for multinational corporations and, while geopolitical tensions have muddied the waters somewhat, the globe’s leading biopharmaceutical innovators continue to invest in China.
“The situation for MNCs in China has improved significantly,” says Gabay of RDPAC, which represents the interests of many of these companies in the country. “Since the regulatory reform of the pharmaceutical sector in 2015, we have seen positive trends in the market dynamics for MNCs in China, particularly in terms of innovation. Today, MNCs represent 28 percent of the total Chinese pharmaceutical market, up from 22 percent in 2018, and the proportion of patented drugs in the market has risen from around five percent back in 2018 to eight percent now.” Moreover, as PhIRDA’s Song points out. MNCs currently account for 50 percent of the market for the top ten critical illnesses in the country.
Gabay continues, “This progress reflects the government’s strong support for innovation and high-quality development in the pharmaceutical sector. While the percentage improvements may seem small, given the size and complexity of China’s healthcare system, even a one percent market share increase represents a substantial impact. These changes are a testament to the evolving regulatory framework, better reimbursement policies, and the overall push for innovation.”
Addressing some of the complaints raised by MNCs operating in China, Song counters that “Have you ever heard of these corporations considering exiting the Chinese market? It’s common for people to express dissatisfaction with life, as we all strive for improvement. When people are content with their current situation, they may lack the drive to advance. Complaints, in a sense, are born from hope – they indicate a belief in the possibility of better conditions. Without hope, there is no complaint, only despair.”
Speeding Up Access to Innovation
One of the reasons why China remains an attractive investment destination for both multinational and local pharma companies alike – beyond its enormous population size and market potential – is significant improvement to its regulatory architecture. The speed at China’s National Medical Products Administration (NMPA) assesses new medicines has improved, while new pathways for these products are also opening up.
The stats back this up. “In 2020, the NMPA built an accelerated review channel for innovative drugs through priority review and conditional approvals, greatly improving the efficiency of innovative drug reviews and providing a vehicle for accelerating R&D,” says Song. “In 2022, the overall completion rate of drug registration applications reached 99.80 percent and the overall completion rate of review for new drug applications and new drugs of foreign origin urgently needed in clinical settings was 98.59 percent and 100 percent respectively.”
Song feels this put the NMPA on a par with its most illustrious global counterparts. “The efficiency of the review and approval processes in China is gradually approaching that of the US FDA. According to statistics relating to the review time of approved products in China and the United States over the past six years, although the review time in China is longer than that of the United States, the average time gap is gradually narrowing. Over the past two years, the average time gap for product review and approval between the two countries has been about 100 natural days.”
Simultaneous regulatory approvals are another important recent development and a key weapon in shortening the time from clinic to bedside. As Gabay points out, “By participating in a global clinical trial, our member companies complete the data required by the FDA, EMA, and the NMPA simultaneously. This allows them to potentially file in the US or Europe and then in China at the same pace. By doing so, if the dossier is filed in China before being approved in the rest of the world, it is granted the status of Innovative New Drug, meaning “New to the World,” which gives benefits for patent term extension for example. Even though the submission might happen later in China, the approval could occur in a much shorter timeframe compared to the traditional method.”
Gabay continues, “In the past, companies used to conduct separate clinical trials in the US, Europe, and then in China. Now, with simultaneous approvals, Chinese patients can access new drugs much earlier. In 2023, three drugs benefited from this simultaneous approval, and in the first six months of 2024 six drugs have already attained such a status.”
NRDL Listings – Essential for Patient Impact
For all pharmaceutical companies operating in China, securing their medicine a place on the National Reimbursement Drug List (NRDL), the catalogue of medications covered under the country’s public health insurance system, is essential and the most viable option for ensuring that patients can access these drugs.
The NRDL aims to enhance healthcare accessibility by subsidizing essential and innovative drugs, thereby reducing out-of-pocket expenses for patients. The average 61.7 percent price reductions that pharma sponsors of drugs on 2023’s list (the list is reviewed and updated annually) had to agree to means more affordable medication for patients in China, but also severe price pressure on the industry.
Additionally, despite expansions, some innovative and high-cost therapies remain excluded from the NRDL, limiting treatment options for patients with specific conditions. For example, certain advanced cancer therapies and rare disease treatments have faced challenges in gaining inclusion.
“This annual process started in 2017 and has drastically reduced the lag time for drugs to be included on the list—from 7.8 years on average in 2017 to just 1.6 years in 2022,” explains Gabay. “This improvement reflects China’s commitment to patient access to innovative drugs.
However, getting on the NRDL is just the beginning. “The next step is hospital listing, which requires significant effort from multiple stakeholders within our companies, including market access and medical teams,” says Gabay. “Encouragingly, early results from the 2023 NRDL batch show good listing coverage, with NRDL drugs now representing 18 percent of the pharmaceutical market. In contrast, innovative medicines not yet on the NRDL account for just 1.5 percent of the market. While going down the market-based route is possible, the NRDL offers a more secure and expansive path to reaching a larger patient base.”
Healthy China 2030: A Roadmap to Better Health, Nationally & Globally
All of these developments are taking place against a backdrop of a long-term national health transformation plan known as ‘Healthy China 2030.’ First launched by the Chinese government in 2016, Healthy China 2030 was introduced as part of China’s national strategy to improve public health, healthcare access, and establish China as a global leader in healthcare by 2030.
Gabay describes the Healthy China 2030 plan as “a very serious effort” on the part of the Chinese authorities, with clear milestones that need to be hit.
“The plan comes with very specific and tangible KPIs, particularly around areas like life expectancy and certain diseases, such as cancer,” he states. “The government closely monitors progress through a dedicated agency that checks these KPIs every two or three years. To support these goals, China has implemented a multi-layered health security system, which includes basic medical insurance, supplemented by commercial health insurance, and other forms of coverage. These measures are designed to help achieve the set KPIs and ensure the healthcare system evolves in the right direction.”
Already significant progress has been made on disease prevention, one of the plan’s key tenets, especially in the context of the COVID-19 pandemic, as Song outlines. “China’s innovative industry has achieved results in disease prevention and control that we can be proud of. In the prevention and control of COVID-19, China’s vaccines, which have received WHO certification, were introduced to dozens of countries around the world.
He continues, “US companies like Pfizer and Merck were at the forefront of developing original medications for COVID but prominent Chinese firms, such as Junshi Pharma and Simcere, were able to localise these products and also develop their own COVID-19 therapeutics with the same targets. Therefore, China is not only a country that has COVID-19 vaccines but also COVID-19 therapeutic drugs, a relatively rare occurrence on a global scale. China’s pharmaceutical industry has made significant contributions to global disease prevention and containment, as many developing countries use China’s drugs.”
