Made-in-China Medicine Testing the World Market
A lot of pharmaceutical firms located in China hope to get major international certifications like certifications from the WHO, EU and Australia. “It is expected that 20 pharmaceutical companies will get international certifications this next year”, claimed Mr Yu Mingde, Vice-director of China Pharmaceutical Enterprises Management Association.
Attraction from the outside
2007 was another year of record for China’s export of western medicine value, which increased by 56%, to US$784 million. But the majority of medications that made it to the top markets like Japan, Korea and Australia were manufactured by foreign companies located in China most often as part of trades in export processing. Products produced by domestic Chinese firms were shipped to lower-end markets like Nigeria and Pakistan. Because Chinese pharmaceutical companies are poor at R&D for proprietary products and development, the majority of their offerings are generic copies of medicines.
You said that “the three major marketplaces in the EU, US and Japan have different markets systems to ours. The same generic drug, the profits from sales to the top three markets are around 5-8 times that of China.” Another issue to consider is that nearly half of drug companies operating in China are currently operating with idle capacity.
On the one hand, it’s the huge profit that comes from international markets, but on the other hand, is the capacity surplus and fierce competition on the market in China. It’s not difficult to comprehend the reason Chinese authorities have been insisting on exports of medicines in its plans for the healthcare industry, and “going out” is now a norm within the Chinese industry. Chinese sector of pharmaceuticals.
The EU requires that access to medicines permits are only granted to companies within the EU area of jurisdiction. Therefore, if foreign companies wish to market their medicines to consumers on the EU market, then they must establish local branches or seek local partners. FDA within the US also has the same regulations.
You suggested that in order for Chinese medicines to be able to access the EU and US market, Chinese companies may try arrangements like locally-based mergers and acquisitions and establishment of local offices or looking for local partners and local partnerships could be the most straightforward. It is believed that firms whose products have been certified by the EU certification, like Hisun Pharmaceutical, Wuxi Kaifu Pharmaceutical and Shanghai Tianping Pharmaceutical, all have decided to go through a partnership.
Yu Yu, who has more than thirty years of experience in pharmaceutical management, pointed out that the procedures, regulations and even the social culture of markets in other countries can be “very differing” when compared to China. He advised that for Chinese businesses who have been “testing water” due to the limitations of distribution channels in foreign markets, They can choose for a time an OEM (original equipment manufacturing) or commissioned processing pathways. When they are more proficient in this area, they can then opt in the direction of mergers and acquisitions and local corporate registration and branding.
Zhejiang Reachall Pharmaceutical’s fast track FDA acceptance within the US was a great illustration of how to leverage smartly. In the early part of 2007, a large American pharmaceutical distributor approached Reachall and asked it to develop ointment-based products to be sold to customers in the North American market. After a string of inspections as well as study and negotiations to conclude, a long-term collaboration agreement was signed by the two companies. The same year, a previously-owned Reachall Ointment product was able to obtain the FDA approval in the US, and the first batch worth $300,000 was sent in America. The US during November.
Breaking through the barriers
Since China’s accession to WTO in 2001, numerous European, American and Japanese pharmaceutical companies have shifted their raw materials and intermediate manufacturing procedures to China. “Production outsourcing has given Chinese businesses a valuable lesson regarding international standards and environmental consciousness as well as monitoring quality and the protection of patents, and that has dramatically increased our competitiveness and our international standing.” You believed that, in the absence of OEM orders and profits, exports of medicines from China need to overcome the hurdles of standardization in international standards and innovation in the quality of products.
The General Manager for Shenzhen Lijian Pharmaceutical, Mr Ouyang Qing, stated that in macro-level aspects, the access to market rules for medications among China and the Chinese market and major markets overseas are comparable. The difference lies in the specific administrative issues, like certification and risk assessment and the use of variable products. Yu added that aside from certification for finished products, certain markets in the world will require certification for related ingredients to ensure the consistency of the quality of the product.
In terms of how to locate those sweet points, there might be some good examples to follow. According to Mr Ouyang, Shenzhen Lijian was earlier involved in exporting ingredient drug products, and whose excellent quality was the reason for an ongoing contract with the German firm. When Lijian was deciding to expand its valuable-adding manufacturing business, the German company was considering moving their OEM production of preparations to France and Italy towards less expensive markets. “So our German partner been a major factor in Lijian’s gaining EU accreditation,” Mr Ouyang revealed.
The key to Reachall’s swift FDA approval in the US was the selection of the product. Compound polymyxin B Ointment can be described as it’s an OTC (over-the-counter) item available in the US, and the FDA already had strict requirements regarding the quality of the ointment, its instructions and the labelling. The ointment was a hit across the US and has gained recognition in terms of efficacy and safety. However, Rachel was the first company in China to create an ointment that was generic, and the company had already adopted FDA standards even while it applied to be certified in China. This surely helped with its entry into the international market.
To compete globally, for China to be competitive, the Chinese pharmaceutical industry must work on the integration of certification systems, English communication skills, the selection of products and R&D. The company’s managers must also be able to make long-term plans rather than being reckless.
“Don’t undervalue the market demand for Chinese generic drugs coming from international markets, who have already demonstrated great interest and acceptance towards the Chinese peers,” Mr Ouyang suggested. Mr Yu was also of the opinion that there would be increasing and greater Chinese pharmaceutical companies entering the major international markets. However, Yu pointed out that there is an unprecedented degree of price and the competition to win international commissioned processing contracts for China. The main advantages of Chinese companies are their cost-effectiveness and decent quality; however, the profit margins will decrease as there are more and many followers trying to grab a slice of the pie.