Commentary: Big Pharma Retreating From China? Not Exactly
Written by Jialing Dai
Edited by Howard Fields
June 26, 2015-Shanghai
A few weeks ago, AbbVie Inc. quietly closed its R&D center in Shanghai. Seeing a slowdown of MNC business growth in China, there is speculation that Big Pharmas are retreating from China.
Since GlaxoSmithKline PLC’s compliance storm in 2013, Big Pharmas have tightened their compliance supervision in China. Meanwhile, hospitals blocked sales reps from visiting doctors. As a result, most Big Pharmas suffered a tough time and lost market share to local generics competitors.
Last year, other bad news hit the market. China FDA said it would tighten its oversight of Multi-Regional Clinical Trials [MRCT]. The move likely will add another year or two to getting new products approved in the country, with a great impact on MNC launch plans in China.
Recently, Bristol-Myers Squibb also has been busy restructuring its business in China, leading to hundreds of position changes and a scaled-down sales force.
All of that activity could indicate the prelude of a massive escape from China. However, is that the truth behind the scenes? My answer is “not exactly”.
AbbVie- Walk Away From Renal Discovery
AbbVie’s Shanghai R&D center was launched in March 2009 to conduct preclinical drug-discovery activities focused on chronic kidney diseases. After AbbVie’s spinoff from Abbott in 2013, the site was moved into the innovative business part--AbbVie.
“We have made the decision to invest more deeply in the core areas of Immunology, Virology, Oncology and Neuroscience and in technology platforms such as genetics and genomics areas where we can have the greatest impact for patients. As a result, we will no longer invest resources in preclinical renal discovery research,” AbbVie China told PharmaDJ in an email response.
“Many scenarios were assessed, and it was determined that there were no feasible solutions to shifting other work to the site,” the company said. “We are focusing on providing them with transitional assistance, including one-on-one meetings with each employee impacted, group sessions on job openings for future opportunities, etc. As of June 18, over 98% of employees have reached an agreement with the company.”
The site houses approximately 55 employees, much fewer than other Big Pharma R&D centers in Shanghai, which usually employ hundreds of scientists. In China, AbbVie operates a commercial organization consisting of 450 employees focused on marketing innovative medicines such as Humira (adalimumab), Kaletra/Aluvia (lopinavir/ritonavir), Calcijex (calcitrol) and Zemplar (paricalcitol).
At same time, the company reaffirmed its ambition in China and promised “a continued commitment to and investment in China.”
“Better healthcare accessibility continues to be a priority for AbbVie in China. We are continuing to partner with various Chinese government organizations and NGOs to understand and address patient-specific priorities and needs,” the company said.
BMS-Same Case
Like AbbVie, BMS announced in 2013 that it was transforming itself toward a more specialty biopharma by halting investment in diabetes and neuroscience and shifting its focus to key therapy areas such as immuno-oncology. As part of its change in global strategy, BMS has downsized its China operation through several restructuring actions, such as transferring its diabetes unit to AstraZeneca PLC.
The move is not a signal of leaving, but of shifting. The company is pulling its focus and sources back to core business and preparing for launching new products in the country, such as the immuno-oncology drug Opdivo (nivolumab), Hepatitis C Virus drugs in China.
While some Big Pharmas try to diversify themselves, either BMS or AbbVie is a good example of becoming a more focused and innovative pharma. But does this model fit the local market in China?
New Marketing Tools
Currently, roughly 80% of Big Pharma business is generated by branded generics in China. However, in coming years for most MNCs, the share of branded generics business will see a decline and be replaced by increasingly innovative business because of intensive generics competition as well as pricing pressure.
Introducing more and more innovative products in China requires stronger communication/education with physicians. However, in the current environment of doctors shying away from sales reps, how to conduct medical education has become an inevitable question for all of Big Pharma.
More companies are leveraging digital tools to educate doctors. Meanwhile, medical-affairs departments are playing a more important role in communicating with doctors.
“It is a fantastic opportunity for Medical and Companies to take new initiatives to demonstrate the value such as innovative product/TA-based medical programs for physicians, payers and patients in a compliance way,” James Cai, Amgen Inc.’s VP for Global Regulatory and Value, Access & Policy, Japan and Asia, said at the June 19 China Medical Affairs Summit in Shanghai.
However, with a lack of communication skills, in-house medical teams may face challenges as much as opportunities.
“One of them is to engage a third-party/organization with expertise to design and create such a program and execute it effectively and timely when in-house medical is in a premature stage. In addition, companies can work together on a new class of treatment alternatives and patient disease management.... We definitely need to develop the professional capability such as MSL,” Cai added.
“Third-party education excellence also plays a critical role for faster introduction of innovative drugs to China patients as we all understand such education can bring the cutting-edge knowledge of new therapy to China academia,” concurred James Mao, Medical Affairs Director at Baxter China.
“The key question is how. Third-party independent education seems to be the best approach to secure impartial information dissemination. Under the huge unmet medical needs in China, we can perceive that third-party education will play a more and more important role in the near future,” Mao predicted.
Dark Before Dawn
China is encouraging innovation to fuel its growth in the future. The trend of healthcare reform is toward a new system of affordable treatment with greater efficacy. Domestic champions and biotech startups are pursuing innovative medicine and lobbying the government for quicker approval and reimbursement for innovative products.
During the recent 25th session of the U.S.-China Joint Commission on Commerce and Trade [JCCT], China promised to cut red tape for imports of new, innovative pharmaceuticals and medical devices.
China will accelerate its study and push forward its reform of the medical device and pharmaceutical regulatory review and approval system, and will make great efforts to eliminate the drug application backlog within 2 to 3 years. China’s efforts will include adding personnel and funds, streamlining relevant mechanisms and increasing the speed of review, according to the U.S. Department of Commerce.
The country also is revising its Drug Administration Law and Drug Registration Rules and reforming its pricing system.
There is no doubt that the market in China is still on track to become the largest pharmaceutical market in the future. Once the regulatory process becomes more favorable, the Big Pharmas that are shifting to more innovative products could be bigger winners.
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