Testing China's generic drug industry#Oriental Outlook#-Sino-US

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Testing China's generic drug industry

Authorities have lowered import tariffs and taxes on most antineoplastic drugs available on the Chinese market since May, taking steps to lower costs, such as price negotiations with manufacturers.

This move will be helpful to Chinese patients, but not significantly as the prices of the original drugs are already very high. One hope for the patients is generic drugs, and for a period, the Chinese had bought generic drugs online from India.

Chinese manufacturers also have produced some kinds of generic drugs, but they are either of inferior quality or have failed to win the trust of the patients.

The State Council, or China’s cabinet, in 2016 launched a quality consistency evaluation of generic drugs, aimed at stimulating the upgrade and structural adjustment of the pharmaceutical industry.

In its 22nd issue of 2018, the Oriental Outlook magazine under the Xinhua News Agency ran a cover story on the country’s generic drug industry, analyzing the influence of the quality evaluation and the future of the industry.

Below is an excerpt of the article.

Nowadays, countries usually encourage manufacturers to innovate new drugs and produce generic drugs, actively seeking ways to ensure drug supply and clinical use, and so does China.
Generic drugs started to enter the market since the United States adopted the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch-Waxman Act, in 1984, which helps patients to get enough cheaper drugs.

China encouraged the manufacturing of generic drugs because it had experienced shortage of drugs in early period, and after the country started to reform and open up, the generic drug industry grew in both scale and quantity.

Official data shows that by the end of November 2017, China has a total of 4,376 drug manufacturers, 90 percent of which are generic drug producers, and 95 percent of 170,000 approved drugs are generic ones.

However, statistics from the China National Pharmaceutical Industry Information Center showed that in 2015, the sales of generic drugs reached 843.6 billion yuan, about 65 percent of the total 1.34 trillion yuan of dug sales.

“Ninety percent of the expenditure on common drugs is spent on original drugs. The quantity of domestic generic drugs and their sales is low,” said Fu Hongpeng, researcher with the China National Health Development Research Center.

A major reason behind the problem is that the quality of generic drugs lacks public trust. Hospitals in large cities do not use the generic drugs, and because of that, the prices of original drugs with expired patents cannot fall sharply.

“In the past, China had few drugs for people to use, which led the government to set a low threshold for generic drugs,” said Fu. “If the foreign generic drugs have 90 percent efficacy of the original drugs, the Chinese generic drugs can only reach about 50 percent efficacy.”

Domestic manufacturers only have to produce the generic drugs as good as the original ones to force the later to reduce the price, said Lei Jifeng, an executive from Qingdao-based Baheal Pharmaceutical Group.

Generic drugs have a huge demand in China, but the industry is beset with problems, such as lots of manufacturers with small scale and low efficacy of generic drugs.

Official data shows that the total output of China’s pharmaceutical industry reached 3.5 trillion yuan by November 2017, but only 16 manufacturers had the output worth 10 billion yuan, and 47 manufacturers had output worth 5 and 10 billion yuan.

However, worldwide, the top 15 drug manufacturers produced $568.6 billion worth of drugs, accounting for 51 percent of the global market, according to consultancy Igeahub.

High quality generic drugs are related to the health and well-being of the people, and the government started to carry out quality consistency evaluation for generic drugs since 2012, pushing ahead the supply side reform to transform the country’s pharmaceutical industry from being large to being strong.

A government document issued in February 2016 said the production of oral solid generic drugs on the National Essential Drugs List (2012) approved before October 1, 2007 should be evaluated by the end of 2018.

Under special circumstances such as necessary clinical trials, the deadline can be extended to the end of 2021, according to the document.

Only 41 drugs passed the evaluation, and 95 percent of generic drugs have not been evaluated by the end of May. If they could not pass the evaluation, the generic drugs will be disqualified and the manufacturers will possibly die in the industry’s reshuffle.


Manufacturers have to find the exact reference preparations of the original drugs, and use new technology and different ways to produce the generic drugs, avoiding patent violations.

Though the active pharmaceutical ingredient (API) plays a major role in the drug, the excipients also play the role of setting the time for the API to be absorbed appropriately, said Chen Baohua, chairman of Zhejiang Huahai Pharmaceutical Co Ltd.

“How to mix the API and excipients and secure the quality is critical for the generic drug,” Chen said. The core of the quality evaluation is consistency of the quality, he said.

The government definitely requires manufacturers to take the bioequivalency (BE) testing on the drugs that should be in mass production in three batches, said Zheng Xiaoqing, an expert from Jinan-based Qilu Pharmaceutical.

BE testing is very strict, and the drugs for testing will be in clinical use to test the indexes of drugs in blood, and the indexes should meet dozens of standards, Chen said.

Though the success rate of generic drugs will be higher than innovative new drugs in the quality evaluation, 50 percent of the generic drugs on average in the global market could not pass the testing.

“If we think some products are difficult to pass the testing, we would engage some institutions to do pilot testing. Pilot testing costs about half a million yuan overseas, but about a million in China,” said an executive of a manufacturer who declined to be named.

Manufacturers will choose some of their products for the testing due to their specific situation, said Li Yan, president of Qilu Pharmaceutical.

By far, only about 600 clinical institutions could carry out the BE testing, and because of the deadlines set by the government, the demands on BE testing increased a lot, and thus the testing price increased.

Lu Yun, a senior researcher from Jiangsu Hengrui Medicine, said that the BE testing on some new drugs cost about 1 to 2 million yuan in the past, but now the cost has gone up to 3 to 5 million.

Judging by the current situation, about 50 percent of the generic drugs cannot complete the evaluation, Lu said. Some companies have dropped out and some could not do it in time, Lu said.
The quality evaluation would possibly solve the historic problem, requiring companies to restructure their businesses and direction, and also heralding an industry reshuffle.


In the past there was no quality evaluation, and even companies with little ability of research and development could produce the generic drugs, but now, they must have high quality talent and huge investment, Lei Jifeng said.

Lei said his company would drop the test on its clarithromycin, one of 289 types of generic drugs, since it is a common antibiotic drug that many companies can produce. His company would invest more on R&D of new drugs, he said.

The quality evaluation and the reform of the new drug approval system will raise the threshold of the pharmaceutical industry, increasing information transparency and creating good environment for companies to develop, Lei said.

When the labels of passing the quality evaluation are attached to the drug packages, it will show the public that the drug matches the original drug, restoring public confidence in domestic generic drugs, Lu said.

“Through this way, it will bring more opportunities to the companies with strong research ability and technology, leading to emergence of stronger companies,” said Tao Jianhong, deputy head of the Southern Medicine Economic Research Institute.

Though the prices of generic drugs are much lower than the original drugs, the availability is limited because of some reasons. Besides lack of public trust, measures taken by the government have also shut the door for them.

Drugs have to pass two barriers to enter hospitals, the first is the provincial drug list and the second is the drug committees of hospitals, a doctor from a hospital said.

On April 3, the State Council issued the opinions to guide the generic drugs that passed the evaluation to be listed on the procurement list as original drugs.

About 20 provinces and cities have issued documents to treat the generic drugs in the same way as the original ones for procurement. Doctors are also encouraged to use generic drugs.

Li Yan said the quality evaluation will raise the cost and the price to some extent in a period, but it will stimulate the companies to invest in research and carry out technological innovation to lower the cost and prices in a long run.

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