China’s FDA to accept foreign trial data for accelerated approvals; sounds great, but future enforcement of IP rights poses threat to US Pharma.

The News:

For decades, patients in China have fought to gain access to cutting-edge medicines thanks to bureaucratic delays that have thwarted drug development. Now a sweeping government overhaul of drug approvals is primed to change that.

Beijing on Sunday (October 8, 2017) announced new rules that will speed up approvals of medicines and medical devices, easing logjams in introducing new treatments.

China is planning to accept data generated from clinical trials run overseas. The proposal is part of a group of changes put forward by the State Council to boost China’s support for innovative drugs and devices and accelerate their path to patients.

The State Council divided its proposals into six sections, each of which contains ideas with major implications for the future of drug and device development and regulation in China. The section on the reform of clinical trials is the largest and potentially most important.

Most notably for multinational drug developers, China’s proposal to accept clinical trial data generated overseas. This would free companies from the time and expense of running large Chinese clinical trials of products that have already proven their safety and efficacy elsewhere. The only proviso is companies must address ethnic differences in their applications.

The rest of the clinical trial reform section covers ways to improve the efficiency and quality of studies run within China. This builds on China Food and Drug Administration (CFDA) proposals to move the country toward a clinical trial approval system reminiscent of that in place in the US. The State Council’s trial-reform package also adds to work by China’s legal and regulatory systems to identify and punish data fraud.

Another section of the State Council notice covers how to speed up the review of applications. The proposals buttress China’s mission to provide abbreviated development and approval pathways for certain drugs and devices, such as those that treat rare diseases or address other major unmet medical needs.

The State Council is also planning to aid developers of innovative drugs by protecting intellectual property. One idea is to create a patent link system designed to cut the risk of infringements while encouraging the development of generic medicines.

Steve’s Take:

The moves proposed by China are being hailed by some as a growth opportunity for international and local drugmakers in the world’s second biggest pharmaceutical market. It also parallels the acceleration of approvals by the US Food and Drug Administration.

Faster approvals could deliver a revenue boost in coming years to Pfizer Inc., GlaxoSmithKline PLC and other multinationals that are expanding there, says Bloomberg. China spent $116.7 billion on medicine in 2016 and the market is second only to the US in size, according to researcher QuintilesIMS. China is revamping its drug regulatory system as demand for new therapies surges due to an aging population and rising incidence of diseases such as cancer and diabetes.

Foreign manufacturers control about a quarter of the Chinese pharma market, with the rest held by local players, estimates Jialin Zhang, senior healthcare analyst at ICBC International Research Ltd.

In the short term, foreign drugmakers might be the prime beneficiaries because they’re already starting to see quicker approvals for their drugs and have deep pipelines of medicines in development, Zhang said.

Most local drug companies are still climbing the innovation ladder. That said, Chinese rivals might be bigger beneficiaries over the long-term thanks to expertise in the local market and cheaper costs, he said.

Still, the Chinese FDA reforms are just one part of the puzzle for foreign pharmas.

The policies will “pave the way for China’s integration into the system for multiregional clinical trials that supports global drug development,” New York-based Pfizer said in a statement.

Crucially, the government said it will also explore a new system linking drug approvals to patent status. This could potentially delay the introduction of generics when there are legal challenges posed by the patent holder.

China’s protection of intellectual properties is still lacking, “and this is also an important reason that restricts the development of our medical innovation industry,” said Wu Zhen, vice minister of China FDA, at a press briefing on Monday (October 9, 2017).

Measures on patents were previously adopted by developed markets such as the US, Europe and Japan, and their implementation helped boost both innovative companies and generic drugmakers, Wu said.

Bottom Line:

Chinese Premier Li Keqiang has emphasized the strength and importance of entrepreneurship and innovation in China, noting that 14,000 new companies are registered daily.

This image of China as an emerging global leader in entrepreneurship stands at odds with China’s common stereotype as a land of copycats and intellectual property thieves, Jason Zukus at The Diplomat notes.

Infamous examples include fake Apple stores in Chinese cities like Kunming and Shenzhen. In the automotive industry, the Chinese Landwind X7’s appearance is virtually indistinguishable from a Range Rover Evoque, while Chinese manufacturer Chery’s QQ was modeled so closely off of the Chevrolet Spark that their doors were even interchangeable.

So how can these two conflicting views of Chinese innovation be squared?

The answer hinges on the gradual shoring up of Chinese intellectual property rights (IPR) over the past three decades.

Before 1985, China had no patent law whatsoever. But since then, China has embraced the importance of intellectual property for its economic development.

As Michelle Lee, the recently departed US Undersecretary of Commerce for Intellectual Property, China “[doesn’t] want to be the low-cost manufacturer of other countries’ inventions, competing on low-wage labor. They want to be the innovative country. To do that, you need to respect IP rights. This is a matter of national self-interest for them.”

China has also continued to update and strengthen its IP laws. Last year, it issued its fourth amendment to the Chinese Patent Law, increasing the limit for potential statutory damages five-fold and adding a range of enforcement provisions.

Steve's Take: #China overtakes US #pharmaceutical market by 2020 - faster than anyone expected Click To Tweet

But increasingly, foreign firms are now seeing Chinese courts as fair arbiters for IPR disputes. A Santa Clara University School of Law study found that from 2006 to 2011, foreign patent owners won 70% of Chinese patent infringement cases brought against local firms.

One thing is crystal clear: China is dashing ahead into today’s western, tech-oriented healthcare arena, with another example of its commitment to provide its citizens the best care it can afford. It is copying the US and European system for drug approval and doesn’t dispute the similarity.

Meanwhile, US pharmaceutical sales to China grew to just $2 billion in 2015, whereas total worldwide pharma exports to that country had reached $108 billion. That’s less than a 2% share of the entire market, according to the US Commerce Department’s International Trade Association (pdf).

China sees itself as the future world leader in a whole host of different categories. It’s expected to overtake the US as the largest pharmaceutical market by 2020, accounting for 7.5% of global sales, according to the US-based consulting company IMS Health. That’s just three short years from now.

The West has seen this coming for decades. But few of us expected the US being eclipsed as top dog so quickly.