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Many pharmaceutical companies in China are hoping to pass major international certifications, such as WHO, EU and Australia certifications. “It is likely that 20 pharmaceutical companies will receive international certificates this year,” said Mr. Yu Mingde, deputy director of the Chinese Pharmaceutical Management Association.

Temptation from the outside

2007 was another record year for Chinese medicine exports to the West, up 56% to US $ 784 million. However, most of the drugs that entered large markets such as Japan, Korea and Australia were products of foreign companies in China, mainly in the form of export processing trades. The products of domestic Chinese companies were exported to lower-ranking markets, such as Nigeria and Pakistan. As Chinese pharmaceutical companies are still weak on proprietary R&D, most of their products are generic copiers.

Yu revealed that “the big three EU markets, the US and Japan, have different market systems compared to ours. For the same generic drug, sales earnings in the three big markets are 5-8 times higher than those in China.” A more pressing issue is that almost half of China’s pharmaceutical companies currently have inactive capacity.

On the one hand, this is a huge gain in international markets, on the other, potential surplus and vicious competition in the domestic market. It is not difficult to understand why the Chinese government is emphasizing the export of medicines in its planning of the health care industry, and “going out” has also become a consensus in the Chinese pharmaceutical industry.

Access to markets

The EU stipulates that access to medicines should be granted only to companies within the EU’s jurisdiction. So, if foreign companies want to sell medicines to the EU market, they have to set up local subsidiaries or find local partners. The US FDA also has similar requirements.

Yu suggested that Chinese drugs enter the EU and US markets, Chinese companies could try such arrangements as local mergers and acquisitions, registering local offices or seeking local partners, and local partnerships would probably be the easiest. It is understood that those companies whose products have received EU certification, such as Hisun Pharmaceutical, Wuxi Kaifu Pharmaceutical and Shanghai Tianping Pharmaceutical, have chosen a partnership path.

Yu, who has 30 years of experience in drug treatment, noted that regulations, processes, and even social cultures in foreign markets are “very different” from China. He suggested that for Chinese companies that are “testing the water” in light of the reality, several foreign distribution channels may temporarily choose OEM (original equipment production) or order a processing route. Only when they become more sophisticated in this area can they go on mergers and acquisitions, register local entities and build a brand.

Zhejiang Reachall Pharmaceutical’s rapid approval of the FDA in the US was a good example of a smart influence. In early 2007, a major US pharmaceutical distribution company introduced Reachall, requiring it to produce fat products for the North American market. After a series of inspections, investigations and negotiations, the parties signed a long-term agreement. That same year, the existing Reachall Ointment product successfully earned FDA certification in the US, and the first batch worth $ 300,000 was shipped to the US in November.

Breaking down barriers

Since China’s entry into the WTO in 2001, many European, US and Japanese pharmaceutical companies have been diverting their raw material and intermediate products to China. “Production outsourcing has taught Chinese companies a valuable lesson in international practices, environmental awareness, quality control and patent protection. This has enhanced our competitiveness and international status.” Yu believed that behind the orders and profits of OEMs, the export of medicines from China must overcome the obstacles of international integration of standards and the breakthrough of product quality.

Managing Director of Shenzhen Lijian Pharmaceutical Company, Mr. Ouyang Qing said that the macro aspects of the medicines access rules between the Chinese market and major overseas markets are similar. The distinction lies in the detailed administrative aspects, such as certification, risk assessment and variable products. Yu also stressed that in addition to certification of finished products, some foreign markets will also require related certification of ingredients, in order to maintain product quality stability.

As for how to find the sweet spots, there may be a few examples to follow. According to Mr. Ouyang, Shenzhen Lijian was previously involved in the export of drug ingredients, whose good quality has been long-standing orders for a German company. When Lijian decided to expand its value-added drug manufacturing business, the German firm simultaneously considered moving its OEM manufacturing plans from France and Italy to lower-cost markets. “So our German partners have played a key role in winning EU certification in Lijiang,” Mr Ouyang revealed.

And the key to Reachall’s swift FDA approval in the US was product selection. Complex polymyxin B fat is an OTC (over-the-counter) product in the US, and the FDA already has detailed requirements for quality, guidance, and labeling for fat. This grease was popular in the US and has been widely accepted in terms of efficiency and safety. On the other hand, Reachall is the first company in China to produce a generic version of fats, and the company did not adopt FDA standards when it applied for certification in China. This has undoubtedly helped his international entry.

In order to compete in the global competition, the Chinese pharmaceutical industry must make efforts to integrate the certification system, English communication skills, product selection and R&D. Company executives should also have long-term planning, not be opportunistic.

“Do not underestimate the demand for Chinese generics from international markets, which have already shown great interest and tolerance for their Chinese counterparts,” Mr Ouyang suggested. Mr Yu also believed that there would be more and more Chinese pharmaceutical companies entering large overseas markets. But Yu discussed that there would be a new level of competition in prices and diversities in China to win multinational order processing contracts. The biggest advantages for Chinese companies are their low price and acceptable quality, but profitability will continue to decline as more and more followers try to take a slice of the cake.

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Source by Face Zhang




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