Contract Research in China: A Catalyst for Pharmaceutical Industry Growth

Strengths and Weaknesses of China’s Pharma Segment

China is the world's most populous country with a rapidly growing economy, huge market potential and plentiful human resources. It is an important market and foreign pharma firms are taking notice. The major advantages and disadvantages for the development of China’s contract research industry are summarized in Table 2:

Table 2: Advantages and Disadvantages of China’s Pharma Segment

Advantages Disadvantages
Low cost of drug development Lack of domestic funding resources and venture capital
Large domestic market potential Overall R&D level is comparatively low
Rich clinical/disease resources Insufficient communication platform
Plentiful, trained human resources Lack of experience in regulatory and other specialized areas
Government support Laboratory facilities tend to be less advanced
Rapidly evolving market environment Most CROs are small
Increasingly innovative drug R&D Evolving financial structures
Growing government commitment to IP protection IP protection issues not fully resolved
Plentiful R&D institutions 

Future Trends

The current CRO market in China is only 500 million RMB ($62.5 million), but the estimated potential market is much larger—estimated at 8 billion RMB (US$1billion) in 2004, (based on a total retail pharmaceutical market of 250 billion RMB)[7]. Sustained expansion of China’s pharmaceutical industry will be mirrored by rapid growth of the CRO segment.

Says MDS’s McClurg, “As China improves its regulatory structure, the environment will become more normalized, and more reliable. People there are recognizing the importance of playing by the regulatory and business rules [of other countries]. This is happening today in both China and India, and it is allowing the international industry to make investments that can be applied reliably.”

McClurg believes that more people will begin to consider Chinese firms as potential partners. “However, it would be a mistake to go there with the primary reason of saving money,” he cautions. “The decision should be made based on the importance of the domestic opportunity. Your expense profile will be different, but not substantially less. Reduced personnel costs will be offset by increased real estate costs, increased travel, management, training, and start-up time and expenses. Establishing personnel policies and finding the right partners is a long-term process that takes a real commitment."

The Chinese are not the only ones who see potential in the CRO market. Western communities also see promise. Forbes predicted that Chinese [and Indian] CROs would become dominant forces in the global CRO market in the not-too-distant future, as China’s pharmaceutical industry picks up speed.

Mingde Yu, executive director of the China Pharmaceutical Enterprise Management Association, predicted in 2005 that the next hotspots in China’s pharmaceutical industry would be CMOs and CROs. As Chinese pharma firms increasingly make innovative drug discovery and development a high priority, and as overseas pharmas increase their clinical trial and drug development projects in China, the CRO segment in China is poised for dramatic growth.

In summary, contract research is both a vehicle for Chinese pharmas to expand their R&D expertise and quality levels, and a bridge for them to enter other markets throughout the world. The next 10 years will be an important period for the expansion of contract research in China, and it will be Chinese CROs that facilitate the development of China’s international pharmaceutical and biopharmaceutical industries.

About the Author

Yibing (Eliza) Zhou is a project director with BioPlan Associates, Inc. She is an editor for the upcoming publication, Advances in Biopharmaceutical Technology in China, to be published by BioPlan in conjunction with the Society for Industrial Microbiology. She holds a Bachelor of Pharmaceutical Chemistry and has five years of supervisory experience at one of the Sun Yat-sen University-affiliated hospital pharmacies. She also has more than 12 years’ experience as a marketing manager at various Chinese-owned and foreign joint-venture pharmaceutical companies. She is based in Guangzhou, China. Contact: yb_zhou@bioplanassociates.com, www.bioplanassociates.com. Tel: +01 301-921-9074.

References:

1. Source:
a) Bian Shuguang. Prospect of pharmaceutical industry [in Chinese]. Securities Times. 2001, June 9
b) China Pharmaceutical Industry Development Report 2003 [in Chinese]. 2003, June [online]. Available from URL: http://report.cei.gov.cn/hy/yy.htm
c) SFDA Southern Medicine Economic Institute Pharmaceutical Economic data 2003 -2005 [in Chinese]
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