Recently, I was asked whether the pharmaceutical industry being exported to China was obsolete. On the contrary, I believe that the west’s system—however bedeviled and dysfunctional—is not only still relevant, but that involving China in the pharmaceutical value chain will resolve two of its fundamental problems. Any discussion of China’s place in the global pharmaceutical R&D framework would be incomplete without first addressing the difference between research and development. Research encompasses very early-stage discovery, including target identification, validation and small-molecule discovery, among many other phases. On the other hand, development describes the commercialization of a chosen compound from preclinical trials to marketing. This distinction is important, as it constitutes a major division in the strengths of western multinationals and local Chinese resources. Despite recent advances, China still lags behind the west in terms of quality of basic science research and pure innovation. However, China has proven adept and has superior potential in subsequent stages of drug development. Exploiting these strengths and weaknesses will be essential for establishing successful drug discovery paradigms in the future.
Two main dimensions exist according to which China would greatly benefit pharmaceutical R&D globally. The first is transitioning at least elements (or the entire) development process of new drugs to China. Clinical trials afford the greatest potential for a partnership platform between China and multinational corporations. MNCs have the resources for innovation, but currently lack the capital to take candidates further down the development aspect of the molecular pipeline. China, on the other hand, has the antithetical problem. Clinical trials represent the largest financial encumbrance and obstacle to drug approval. As mentioned in a previous article, clinical trials comprise the majority spending in drug development, ranging from 40-60% of total budgets. Conducting preclinical animal studies and human trials in China provides the greatest value to MNCs; one source estimated the potential to reduce costs by 67%, while others believe that trials in China cost 20% that in the US or Japan. China is host to rich early and late-stage clinical trial resources, including extensive animal facilities, which likely circumvent the regulatory hurdles constraining animal testing in the US. Valuable human assets are also present in China: a prodigious number of skilled clinical and investigative professionals are available, frequently at a markedly reduced cost compared to Europe and the US. Not surprisingly, China also boasts an enormous patient pool that is not risk-averse, leading to faster and cost efficient proband recruitment. Chinese patients benefit from access to free high-quality healthcare, and demonstrate greater retention rates and adhesion to study protocols, which contribute to higher quality study data capable of providing a more global picture of treatment effects with fewer missing variables. Most importantly, under current laws, first-in-human investigations are prohibited in China for foreign-developed molecules, necessitating that late-stage animal studies or even earlier R&D stages take place in China. However, given regulatory environments both within China and the US, conducting international, multicenter clinical trials in China is progressively advantageous, and necessary to access a market that would be ludicrous to ignore.
Regulatory trends in the US and Europe have also prompted multinationals to seek alternatives to domestic clinical trials. The time candidate drugs spend in development in the western hemisphere increased from an average of 9.7 years in the 1990s to 13.9 for drugs released after 2000. A major contributing factor to the timeline elongation has been the requirement for larger and more comprehensive clinical trials, which have been rendered nearly impossible given current circumstances in the US and Europe. Complementary reforms in China have heightened its appeal as a clinical trial destination, owing, in part, to the fact that experienced sites in developed countries are unable to accommodate the swelling demand. Despite historically slow, beleaguered trial processes, recent reforms in China have greatly reduced the time necessary for large-scale investigations, further decreasing the cost of conducting clinical trials in China. The Chinese Center for Drug Evaluation (CDE) has prioritized improving trial quality standards and streamlining approval pathways, and has succeeded in decreasing assessment time while simultaneously augmenting the number of annual approvals, trends that are expected to continue. Thanks to the government’s efforts, process transparency has also improved. A major facet plaguing the US pharmaceutical pipeline is the opacity, red tape, and archaic IT systems involved with FDA submissions. China has taken proactive steps in this department with its regulatory reforms and commitment to continually improving the process over the coming years, and many international regulatory agencies (the FDA and EMA) have recognized the validity of international clinical trials (provided they adhere to Good Clinical Practices) and their applicability toward domestic drug approvals. As globalization comes to define the drug evaluation landscape, strategic offshoring or outsourcing of elements of the R&D chain is increasingly necessary to remain competitive.
The second dimension by which China can resolve a source of stagnation in the drug pipeline is the knowledge chasm between basic science research and commercial projects. There is a dearth of information, tools and processes to effectively bridge the gap between biological discoveries and the initiation of the drug development process. It appears to be something of an orphan responsibility, considered too applied for academic researchers and a poor investment for industry because it can be considered, at least in part, a public good. However, with budgets becoming ever more stringent, methods to better predict the success of candidate molecules in clinical trials are critical. Enormous losses are incurred when promising compounds in the laboratory are discovered to be ineffective or toxic in humans. One solution to this barrier is the cultivation of technologies focused specifically on assessing the suitability of candidate treatments in clinical settings, such as better indicators of toxicity and efficacy to save time and money. Another example: validating the “druggability” of human proteins as targets prior to small-molecule discovery. As discussed in a previous article, Drug procurement practices and pricing limitations in China have escalated competition among pharmaceutical companies operating domestically. These economic conditions will likely lead to consolidation of the sector as price erosion forces some out of the market entirely. Ideally, others will recreate themselves or emerge de novo to fill voids in the value chain. Thus, China is currently uniquely poised to address such unmet needs. There will be great market opportunities for companies providing highly specialized services or unique focus on biological pathways, for example. Strategic outsourcing of individual components of the development process is becoming popular in the pharmaceutical industry, increasing the foothold for new players to enter the R&D chain through specialization. China will provide a niche for adroit, technology-driven enterprises to add value through a specific focus, reducing the cost and risk for companies with limited R&D budgets.
Many MNCs have created a precedent of supplying China with early-stage technologies in order to take advantage of their favorable development capacities. Bristol-Myers Squibb has forged strategic partnerships with a number of Chinese biotech companies, notably Simcere, to boost its R&D syndicate in the country. Merck has partnered with the Beijing Genome Institute (BGI) in an effort to wed its drug development know-how with BGI’s sequencing and bioinformatics aptitude. Pfizer has created alliances with Micu Rx Pharmaceutical and Cumencor Pharmaceuticals to address an important area of unmet need: development of antibiotics, particularly for multi-drug resistant tuberculosis. Bolstered by government support and favorable economic conditions, partnering with domestic companies has allowed MNCs to expand their R&D value chain and tap into previously neglected research areas. This model of R&D export is also the most insulated from intellectual property theft, and perhaps the most prudent considering China’s reputation for lackluster enforcement of IPR legislation. Keeping trade secrets and information vital to a compound’s biological activity in country may decrease the risk of theft or espionage, and certainly protect a company from losses due to attrition of key employees. Quality control improvements are undeniable, but questions and public concern regarding drug safety—primarily contamination and accurate dosing—are prominent and not unfounded. Until China demonstrates itself to be superior or equal in its manufacturing standards, exporting only portions of the development pipeline could prove the most judicious approach.
The potential benefits of cultivating strategic partnerships with Chinese pharmaceutical companies cannot be overstated; the administrative climate favors obtaining registration for new molecular entities and commercialization approval for novel remedies. China’s administration has made an unprecedented commitment to the biomedical industry, pledging billions of renminbi to drug innovation efforts. Foreign MNCs will not be able to access government-sponsored funds directly, but they will have the possibility of working with liquid companies with the capital to enhance the quality and scope of their R&D programs. Government participation will be key in solving the social dilemma underlying the information rift separating scientific discoveries and commercialization. Quite simply, funds and incentives will be available to support the exploration of semi-public goods, augmented by the government’s encouragement of participation between universities and industry. Burgeoning public institutes and varying incarnations of national research curricula will continue to support and complement industry efforts by conducting more upstream and public investigations not sufficiently explored by the pharma industry alone. An analogous example of similar undertakings in the US is not available. Local R&D and manufacturing centers will also allow MNCs to build reputations for innovation within China, helping them to garner support from key opinion leaders who affect consumers’ product perception and purchasing preferences, including doctors and government officials. Hosting at least a segment of operations in China will allow MNCs to tailor offerings specifically for one of the largest single markets in the world, with distinct needs and even unique disease etiologies. Large-scale domestic operations expose a direct avenue to access a broad range of patients and increase sales potential prior to drug approval.