Last year, China boasted the world’s second largest pharmaceutical market. Recently, the country has taken steps to boost investments in its generic pharmaceuticals sector. How could a new flood of cheap, mass-produced generics from China affect the US pharma sector given current trade tensions?
China and the Generics Market
The Chinese government is pushing for policies that encourage pharma companies to produce generic versions of their drugs. While the country has been known to rely largely on generics already (over 95% of China’s FDA approvals have been granted to generic medicines), the industry has also been plagued by concerns about the quality and effectiveness of non-branded drugs. With increased awareness about quality issues in consumer goods among the Chinese population, pharma products have also fallen under public scrutiny.
To address this, China’s FDA has started to modify their guidelines for stricter evaluations. Products that are able to pass evaluations will be labeled the same generic name as the brands in procurement catalogs used by hospitals to purchase medicine. China expects these changes to help strengthen the notion that locally-developed drugs can compete globally.
No Trouble Finding Investors
China’s drive for a stronger pharma presence worldwide is gaining support from a growing number of local and foreign companies. Last year, Chinese company BeiGene sold its cancer drug’s overseas rights to US company Celgene for US $263M. Drugmaker AstraZeneca has also partnered with Alibaba’s Ali Health division and Tencent to continue growing their production and improving operations. These partnerships provide local companies with the chance to grow overseas revenues while at the same garnering a more global consumer base.
China’s huge potential for sales and expansion, coupled with shorter approval times for clinical trials and the country’s reputation as a manufacturing hub, continues to attract investors.
A Threat to US Pharma?
China’s newfound reliance on advanced technology for improved generic drugs marks a turning point for the global pharma industry. They have already flexed their manufacturing muscle to ramp up exports of USFDA-approved drugs over past two years. With higher standards for materials and company-friendly policies to encourage advanced research and production of better-quality generics, China is proving to be the fastest emerging market in the pharmaceutical sector.
US President Donald Trump’s newest tariffs against China place a 25% tax on raw drug ingredients and vaccines, certain medical devices, and even hospital materials as small as syringes. However, this might prove to be more harmful than intended as the USFDA estimates about 80% of the ingredients used for drugs needed by US patients are imported from China and India. This will drive manufacturing costs higher, affecting local generic drug makers like Pfizer Inc., Novartis, Mylan, and Teva Pharmaceutical, among others. Increasing production costs will in turn burden locals by increasing medicine prices. A number of pharma advocacy groups have already started raising concerns regarding this possible cause-effect scenario and the difficulties it may entail.
Given China’s growing generics market and the US administration’s desire to lower drug prices, perhaps a rethinking of trade policies is in order. After all, every improvement in the global pharmaceutical industry is a win for global health.