Many pharmaceutical companies in China hope to pass major international certifications, such as WHO, EU, and Australian certifications. “It is likely that 20 pharmaceutical companies will be able to obtain international certifications this year,” said Yu Mingde, vice director of the China Pharmaceutical Enterprise Management Association.

temptation from outside

2007 was another record year for China’s Western medicine export value, rising 56% to US$784 million. However, most of the drugs that went to big markets like Japan, Korea and Australia were the products of foreign companies in China, mainly in the form of export processing trade. Products made by Chinese domestic companies were exported to low-end markets such as Nigeria and Pakistan. Since Chinese pharmaceutical companies are still weak in proprietary R&D, most of their products are copycat generic drugs.

Yu revealed that “the big three markets of the EU, the US and Japan have different market systems than ours. For the same generic drug, the profits from selling to the big three markets are 5 to 8 times higher.” to those of China”. A more pressing problem is that almost half of pharmaceutical companies in China currently have idle capacities.

On one side is the high profit from international markets, on the other is excess capacity and fierce competition in the domestic market. It’s not hard to see why the Chinese government has been emphasizing drug exports in its healthcare industry planning, and “get out” has also become a consensus in the Chinese pharmaceutical industry.

Market access

The EU requires that access permits for medicines only be granted to companies within the jurisdiction of the EU. So if foreign companies want to sell medicines on the EU market, they have to set up local branches or find local partners. The FDA in the US also has similar requirements.

Yu suggested that in order for Chinese medicine products to enter the EU and US markets, Chinese companies can try arrangements such as local M&A, registration of local offices or seeking local partners, and local associations. they would probably be the easiest. It is understood that those companies whose products have passed EU certification, such as Hisun Pharmaceutical, Wuxi Kaifu Pharmaceutical and Shanghai Tianping Pharmaceutical, have chosen the path of association.

Yu, who has 30 years of experience in pharmaceutical management, noted that regulations, processes and even social cultures in foreign markets are “very different” from those in China. He suggested that for Chinese companies that are “testing the water”, in light of the reality of few foreign distribution channels, they can temporarily choose OEM or commissioned processing routes. Only when they become more sophisticated in this area can they go for mergers and acquisitions, local entity registration and brand building.

Zhejiang Reachall Pharmaceutical’s accelerated FDA approval in the US was a good example of smart leverage. In early 2007, Reachall was approached by a large US pharmaceutical distribution company and asked to produce ointments for the North American market. After a series of inspections, investigations and negotiations, a long-term cooperation agreement was signed between the parties. In the same year, an existing Reachall ointment product successfully obtained FDA certification in the US, and the first batch worth USD 300,000 was shipped to the US in November.

breaking the barriers

Since China’s entry into the WTO in 2001, many European, American and Japanese pharmaceutical companies have moved their production processes for raw materials and intermediate products to China. “Outsourcing of production has taught Chinese companies a valuable lesson in terms of international practices, environmental awareness, quality control, and patent protection, and this has greatly enhanced our international competitiveness and status.” Yu thought that behind the OEM orders and profits, China’s drug exports have to overcome the barriers of integrating international standards and advancing product quality.

Shenzhen Lijian Pharmaceutical General Manager Mr. Ouyang Qing said that in terms of macro aspects, drug market access rules between the Chinese market and major foreign markets are similar. The differentiation lies in detailed administrative aspects, such as certification, risk assessment and variable products. Yu also stressed that in addition to the certification of the finished product, some foreign markets will require the related certification of ingredients to maintain the stability of product qualities.

As for how to find the sweet spots, there may be some examples to follow. According to Mr. Ouyang, Shenzhen Lijian was previously in the business of exporting pharmaceutical ingredients, the good quality of which had won a long-term order for a German company. When Lijian decided to expand its value-added drug production business, the German company was simultaneously considering moving its production of OEM preparations from France and Italy to lower-cost markets. “So our German partner played a key role in Lijian’s obtaining EU certification,” Mr. Ouyang revealed.

And the key to Reachall’s rapid FDA approval in the US was the choice of products. Compound polymyxin B ointment is an over-the-counter (OTC) product in the US, and the FDA already had detailed requirements for ointment quality, directions, and labeling. This ointment was popular in the US and had gained acceptance in terms of efficacy and safety. On the other hand, Reachall was the first company in China to produce the generic version of the ointment, and the company had adopted FDA standards even when it was applying for certification in China. This certainly helped his international entry.

In order to participate in the global competition, the Chinese pharmaceutical industry must put effort into the integration of the certification system, English communication skills, product selection, and R&D. The managers of the company must also have long-term planning, instead of being opportunistic.

“Don’t underestimate the demand for Chinese generic drugs from international markets, which have already shown great interest and tolerance towards their Chinese counterparts,” suggests Mr Ouyang. Mr. Yu also thought that there will be more and more Chinese pharmaceutical companies entering major foreign markets. But Yu reminded that there will be a new level of price and variety competition to win multinational contract processing to order in China. The biggest advantages for Chinese companies are their low costs and acceptable quality, but profitability will gradually decline as more and more followers try to grab a piece of the pie.