China Today: Biogenerics in China: An Evolving Industry

June 1, 2007
BioPharm International, BioPharm International-06-01-2007, Volume 20, Issue 6

In China, the presence of a substantial biogenerics industry reflects a growing need to provide healthcare to domestic populations, at a reasonable cost.

Development of biogenerics, perhaps more accurately termed biosimilars, today is more a function of intellectual property (IP) and politics rather than scientific factors. With the approval of biogenerics no longer hypothetical, the global industry must now determine pathways for efficient development. China's rapidly growing biopharmaceutical industry plays a significant role in the biogenerics picture. A key question, addressed in Advances in Biopharmaceutical Technology in China, a recent study conducted by BioPlan Associates and the Society for Industrial Microbiology, is whether China's biogenerics industry is moving in the right direction, or in a disorganized way with little consideration for IP issues (See Biopharm International, May 2007, "For Biopharma Considering China, Are IP Fears Unfounded?")

Most healthcare policymakers in China and in the West recognize that generic drugs are important to healthcare policy. Because biopharmaceuticals are currently among the most expensive therapeutics on the market and many blockbuster biopharmaceuticals are losing patent protection, the biogenerics industry will likely expand.

In China and India, where regulatory and IP standards for biogenerics are more liberal, a biogenerics industry is already thriving. In China, the presence of a substantial biogenerics industry reflects a growing need to provide modern healthcare to its domestic populations, at a reasonable cost. Although China sells its products primarily domestically, many US and European drug innovators struggle with the impact such biogenerics may have on commercialization opportunities and IP protection.

BIOGENERICS AND BARRIERS TO EXPANSION

Biological products in China are mostly biosimilars or biogenerics of Western-invented products. This situation is changing as Chinese biopharmaceutical companies and venture capital firms invest in product innovation. However, the country's relatively low investment in R&D and the late development of its recombinant DNA technologies have resulted in most biologics production being based on non-Chinese IP. In recent years, however, government support has encouraged greater innovation in biological products marketed in China. Still, there are obstacles hindering the industry's success including the following:

  • Low levels of product commercialization: Inexperience in manufacturing processes increases production costs and makes large-scale production difficult.

  • Inadequate market expansion: Products that may be highly successful in the US, such as erythropoietin (EPO) and growth hormone (GH), tend to yield smaller sales revenues in the Chinese market. Population structure and retail pricing of these drugs are relevant factors contributing to the disparities.

  • Small-scale production with duplicated investment: 21 genetically engineered drugs and vaccines have been approved for marketing in China. While just one or two manufacturers could meet market demands, multiple producers duplicate production.

  • Relatively few products have proprietary IP rights: The technology behind many products is not adequately protected—many are produced on a small scale, with small profit margins.

  • Limited managerial and technical leadership: There is a need for more experienced and talented technical professionals.

PHARMACEUTICAL INDUSTRY BACKGROUND

China produces more generic drugs than any other country in the world. Since the 1950s, China has manufactured these products to supply its domestic demand. Today, generic drugs still dominate the Chinese pharmaceutical market. However, we are seeing more domestic innovation, and the market share of innovative drugs increased from 17% in 1997 to 20% in 2003.1 For healthcare policy, economic, and scientific reasons, generic drugs have played a key role in the Chinese pharmaceutical market and this trend will most likely continue in the future.

China began developing innovative drugs only recently. Its ability to innovate remains relatively limited, partly due to the current capital investment climate. In contrast, most Chinese drug manufacturers have produced generic drugs for several decades. China's technical competence in producing generic drugs and its advantage in raw materials have made the country a global off-patent crude drugs processing center.

In the early 1980s, the Chinese pharmaceutical industry began to modernize. However, Chinese pharmaceutical companies did not develop innovative drugs because of financial and technical obstacles. Patent laws were not a significant consideration. When China's patent law was first enacted (April 1985), it excluded drugs from patent protection. China's Drug Administration Law (July 1985) specified that pharmaceutical products that had never been manufactured in China were 'new drugs.'

China has a short, but very rapidly evolving history of protecting IP rights for pharmaceutical products. Practical patent protection for pharmaceuticals was simply not available in China until 1993 when China's patent law legalized drug patent protection. Since 1998 China's State Drug Administration (SDA) Protection Office has authorized administrative protections for 155 drugs from 12 different countries as of July 2005.2 Table 1 lists these drugs.

Table 1. Imported drugs with administrative protection in China

Following China's entry into the World Trade Organization (WTO) in 2001, more aggressive measures were taken by the government to address IP shortcomings. These included, in 2002, the definition of 'new drug' to harmonize with the Trade-Related Aspects of Intellectual Property Rights (TRIPS). China issued new Drug Registration Regulations in 2002 to improve its patent protection system. China's patent law was amended again in 2002, pursuant to the TRIPS to harmonized China's patent system with other WTO member countries.

Over the past several years, China's IP protection for pharmaceuticals has conformed with international standards. In June 2006, Pfizer won its patent protection lawsuit for Viagra in China, ending dozens of Chinese companies. The fact that the Chinese companies appealed this decision suggests a significant shift in recognition for the rule of law. Table 2 lists expired or expiring proprietary biopharmaceuticals in China.

Table 2. Expired or expiring proprietary biopharmaceuticals

HEALTHCARE IN CHINA

With over 1.3 billion people, China has the world's largest population, and arguably the greatest need for biogenerics. Although China's gross domestic product (GDP) reached $2.28 trillion in 2005, the per capita GDP was only $1,700. Similarly, China's per capita drug spending is among the lowest in the world—less than $20.00 annually. Furthermore, for the majority (80%) of Chinese who live in rural areas, yearly drug spending is only $5.00 per capita. By contrast, Americans spend more than $700.00 on medicines each year.2 Clearly, generic drugs make up a vital component of the domestic Chinese healthcare situation.

LIMITED INSURANCE COVERAGE

According to China's Social Science Institute, 65.7% of Chinese citizens are not covered by any kind of medical insurance. In 2005, only 133 million urban employees were covered by the "National Basic Medical Insurance." Inexpensive Chinese generic drugs and traditional Chinese medicines (TCMs) account for about 90% of the basic medical insurance drug catalogues. Expensive imported medicines are prohibited or severely restricted from China's social medical insurance (See Table 3). As a result of the high cost of medicines, China's National Development and Reform Commission (NDRC) drafted plans to cut the price of a number of commonly dispensed drugs.

Table 3. Comparison of maximum retail price of interferons (IFN) controlled by National Development and Reform Commission (NDRC)

BIOGENERICS VERSUS INNOVATION IN CHINA

The concept of biogenerics in the West is seen as an IP issue. In China it is a healthcare issue. Chinese biogenerics today include both off-patent and generic biological products developed by Chinese biopharmaceuticals before China entered the WTO. Since biogenerics account for over 95% of China's biopharmaceuticals, the biopharmaceutical industry in China today is virtually a biogenerics industry.

China's biopharmaceuticals industry began in the 1980s when the Chinese government introduced a series of national programs (e.g., the 863 Program, 85 and 95 Key Tech R&D Program) and placed biotech and related industry as one of the "major development sectors." Since the first Chinese-developed biotech drug—recombinant human interferon ?1b (produced by Shenzhen Kexing Biotech Co.)— entered the Chinese market in 1989, China's biopharmaceuticals industry has undergone rapid expansion. Today, Chinese biopharmaceutical companies have marketed 361 recombinant biogenerics (including therapeutics and vaccines) and 25 biotech drugs.4 More than 10 innovative biotech drugs have been launched into the market, and more than 100 biopharmaceuticals are currently at clinical trial stages.

Biopharmaceutical production value has grown from $30 million in 1986, to $4.2 billion in 2005. China's biopharmaceuticals sales revenue has grown 20–30% over the past five years. In 2005, biopharmaceuticals accounted for 7% of the pharmaceutical market (Figure 1). According to the China Biopharmaceutical Engineering Industry Outline, the country's biopharma industry production value is projected to exceed $12.5 billion by 2015.

Figure 1. China's pharmaceuticals and biopharmaceuticals sales revenue in 2005 (billion RMB)

BIOGENERICS MANUFACTURERS

There are over 2,000 biological products made by more than 200 Chinese biopharmaceutical companies, 95% of which could be classified as biogenerics. Chinese biogenerics include a wide range of biologics, such as genetically engineered drugs, vaccines, antibodies, and diagnostic agents. The major biogenerics and manufacturers are summarized in Table 4A and B.

Table 4A. Major biogenerics in China

Some Chinese biogenerics (e.g., rhG-CSF and EPO) have been manufactured and sold legally in China. G-CSF is manufactured by more than 30 Chinese biogenerics companies. Amgen applied for administrative protection for its Neupogen (G-CSF) and Epogen (EPO) in 1993, but did not win approval from the Chinese regulatory authorities. Other court cases are pending.

Table 4B. Major biogenerics in China

Some products are more likely to succeed as biogenerics. Several are currently under development by companies and many are already marketed in China and other developing countries. Short to mid-term biogenerics opportunities include hGH (registered), Insulin, IFN?, IFN?, G-CSF, GM-CSF, and FSH. Other longer term opportunities may include: Abciximab, Rituximab, Basiliximab, Infliximab, Trastuzumab, Alemtuzumab, and Adalimumab.5

CONCLUSION

Generic drugs have made significant contributions to China's healthcare system since the 1950s. In the past few years, China has begun to develop its own innovative drugs; yet generic drugs will continue to play an important role. China's biopharmaceuticals industry continues to expand and is likely to continue its steady growth through the foreseeable future. Chinese state and local governments are making concerted efforts to push for innovation, better R&D, and greater early-stage funding.

To assure continued industry growth, Chinese authorities recognize the importance of enhancing their country's IP protection systems for both domestic and foreign biologics. The fact that Chinese companies are using the court systems and lawsuits to seek remedies indicates a major change in the Chinese pharmaceuticals business environment. China's large domestic market potential and its solid competence in producing biogenerics are key factors driving its future direction.

REFERENCES:

1. The journey of generic drugs to overturn innovative drugs (in Chinese). Medicine Economic News. 2004; Dec. 30.

2. http://www.oecd.org/document/25/0,2340,en_2649_201185_34967193_1_1_1_1,00.html.

3. http://www.sfda.gov.cn/cmsweb/webportal/W4291/A64003794.html.

4. China's bio-tech and industry appears rapid expansion trend. A report (in Chinese). 2006; Apr. 22. Available at http://www.chinabgao.com/freereports/10264.html.

5. Rader R. Biopharmaceutical products in US and European markets. 5th Ed. BioPlan Associates, Inc. 2006.

Eric Langer is president of BioPlan Associates, Rockville, MD, 301.921.9074. elanger@bioplanassocicates.com