China: Gaining Entry
by Coeli Carr
October 2008
Pharmaceutical companies in a fierce race to bring their products to market have begun to regard economically burgeoning China as an R&D paradise.
Photography by Mads Nissen/Getty Images
It was a typical Pfizer board of directors meeting in all ways except one—location. The event, held in October 2006 and attended by the company’s senior leaders, occurred for the first time ever in China. “Going to China and understanding its commercial and research-and-development potential is an important part of their strategy,” says Steve Q. Yang, vice president and head of R&D Asia for Pfizer.
Less than two years later, Pfizer even more emphatically underscored its commitment to China, a country that’s expected to become one of the world’s top health care markets by as early as 2010. The company’s presentation to Wall Street in March 2008 revealed Pfizer’s new Asia strategy, which includes plans to expand operations in China, increasing by sixfold the 110 cities it now serves through its sales force. “China is one of Pfizer’s key emerging markets,” says Yang, who holds a doctorate in pharmaceutical chemistry, was hired by Pfizer in the United States in 2001, and then sent to China in 2006 to support the company’s vision there. “Having a research-and-development investment in China is strategically important for us.”
There are many reasons why China has become increasingly attractive as an R&D destination for pharmaceutical companies. Yang cites the talent base and a highly educated work force, noting that more than half of Pfizer’s R&D employees in China have master’s and Ph.D. degrees. He also praises the advanced infrastructure and technology that accommodates communications and data management. The most attractive lure, however, just might be its citizens and their substantial unmet medical needs.
“China has a population of 1.3 billion people and an increasing ability to support the need for health care, so the market there will continue to grow very rapidly,” says Mark Bamforth, senior vice president of corporate operations and pharmaceuticals for Genzyme, a biotechnology company based in Cambridge, Mass., which recently announced plans to build a US$90 million R&D facility in Beijing. “It’s very important for us to have a presence in China and be connected to the medical community there.”
Lai-Lee Tan, the Beijing-based head of clinical operations and country head of Quintiles Greater China, notes that about half of China’s people now live in urban areas, where that population’s exposure to more Western lifestyles has caused changes in disease patterns more comparable with those in developed countries. Physicians in China are interested in clinical trials that represent new treatments for these diseases, she says.
Yang gets even more specific. Half of the world’s cancer-related deaths occur in Asia, and nearly one-quarter of those deaths occur in China, he says. Bringing in new, efficacious cancer medication to the Chinese market can mean saving a lot of lives. Yes, there’s been aggressive growth in China, he says, because that’s where the medical needs and diseases are. Not surprisingly, foreign companies eager to capitalize on these conditions and to expand their R&D activities are applying for authorization to conduct potentially life-saving clinical trials in China in ever increasing numbers.
Getting the Green Light
In Asian countries, including China, bringing a new drug to market requires local approval, Yang says. “Every clinical trial conducted in China by a foreign pharmaceutical company that seeks regulatory approval of new drugs in China and every global clinical study conducted by a foreign pharmaceutical company that includes the participation of Chinese patients must receive authorization from the State Food and Drug Administration (SFDA) in China,” he says.
“A foreign company that makes an application to include China in a global clinical trial for a drug that is not yet approved or licensed in the United States or Europe must submit extensive documentation to SFDA attesting to the drug’s safety,” Yang says. The application must include detailed information on the chemical manufacturing and composition, preclinical safety data, clinical data from healthy volunteers studied outside China (Phase I) and data from patients studied outside China (Phase II), he adds.
“In many cases, a foreign company will already have data for Phase I, II and even some Phase III studies in the West before applying for a clinical trial in China,” Yang says. After a foreign company presents its application and documentary evidence, the authorities, according to its guidelines, will review the company’s clinical trial design for approval.
Not surprisingly, paperwork associated with previous clinical trials and studies can be extensive. Regulatory approval for a foreign company to conduct a clinical trial in China can take between six and eight months, Tan adds.
SFDA stringency also applies to clinical trial locations. In the beginning of 2004, Tan says, SFDA began to qualify hospital sites—there can be multiples sites, according to specialty, in the same hospital—to ensure the quality of China’s clinical trials. More than 1,000 sites in about 250 hospitals are currently certified; the status is valid for about three years. “There are hospitals and hospital departments keen to be the site of clinical trials, and they apply to get certification, which can take three or four months,” she says.
The good news is that regulations have been revised several times over the last few years to make for a more streamlined application experience. “It’s an ongoing process, with regulations changing for the better,” Tan says. “In October 2007, the timeline was reduced and the application process updated.”
Making Inroads
“In emerging markets, the regulation of new drug approval is still evolving, although very rapidly,” Yang says. Because of this development, several global pharmaceutical companies have already established an R&D presence in China, and the momentum to get a foothold has been increasing.
When Yang started working for Pfizer in 2001, the company’s presence in China—for both commercial and R&D purposes—was relatively small. However, by the end of 2005, Pfizer had solidified its presence by creating a global R&D center to help support and manage data from the company’s global clinical studies, some of which involve Chinese patients. Now, Pfizer has 200 employees in Shanghai involved with R&D efforts and is increasing the number of global clinical trials that involve China each year. Yang notes that Pfizer’s Asia R&D strategy is to include more and more Asian patients, including Chinese, Korean and Indian, in its global new-drug development program. “Chinese regulatory agencies see the value of Chinese patients participating in global clinical studies, which also increases the chances of the drug getting approved,” he says.
Pfizer has also established several partnerships—two years ago Yang started a strong initiative to build collaborations—with both academic and contract researchers in China. One of Pfizer’s
academic projects involves kinases, a particular kind of protein important in cancer and inflammation research that Pfizer hopes will play a role in creating better drugs.
Later stage clinical trials and early stage research are “both equally attractive” to Pfizer, Yang says, adding that the company is exploring both to a greater degree than ever before.
Over the last three years, Roche has been conducting about two dozen local and multinational clinical trials, with a focus on oncology. Rae Yuan, the head of development in China for Roche Pharma and who oversees all clinical trials there, says many companies coming to China to conduct R&D appreciate that the government supports long-term objectives, and that the country’s “good clinical practice” is becoming more closely aligned with Western standards.
“The government has a really strong desire to expand its pharmaceutical industry from a manufacturing focus to one that includes more research and development,” says Yuan, who’s based in Shanghai. “China welcomes global clinical trials, as it’s a way for local Chinese physicians to see the next generation of drugs and get involved with new research activity. It’s a great learning experience.” Roche Pharma, which has approximately 2,000 employees in China, about 200 of which are involved in R&D, has been conducting local clinical trials in China since the mid-1990s, and began its multinational trials a couple of years later.
Genzyme is also on the verge of creating a long-term presence in China. As part of its expansion plans—it already has 25 employees working in offices in Beijing and Shanghai—the company is building an R&D facility in the Zhongguancun Life Science Park area of Beijing that will include laboratory-scale operations for MACI cell therapy and polyclonal antibody operations. The building, which will accommodate about 350 employees and contain a lecture hall, is scheduled to open in 2010. “The facility will be able to support products specific to China, local clinical trials and research programs supporting corporate initiatives,” Bamforth says.
Last year Genzyme began a collaborative relationship with Sunway Biotech, a Chinese company that developed the first gene therapy drug approved in China, and the two companies are now developing a new gene therapy product for cardiovascular disease. “We believe Sunway’s the best partner and fastest route to get that product to market in China,” Bamforth says, adding Genzyme is eager to create even more partnerships. “Part of our business model is collaboration with other companies.”
Paving the Way with Contract Research Organizations
Although the larger global players have employees in China that work with local regulatory agencies on a regular basis and have physicians and medically trained employees to lead clinical trials, they still often rely on contract research organizations (CROs).
Basically two kinds of CROs exist in China. One type is the CRO that focuses on supporting clinical trials and can even help foreign companies—especially those that don’t have either a China presence or adequate resources and capabilities—apply to the SFDA for authorization to conduct a clinical trial. “You need to have local expertise in China,” Tan says.
Because the clinical trial application process is so lengthy, having a CRO to monitor the application often is a good idea. Companies rely on the CRO’s expertise in assembling the application—even doing translation of documents—as well as advising the companies of regulatory strategy, Tan says.
The second type of CRO, which assists pharmaceutical and biotech companies with their discovery and pre-clinical research, is a more recent phenomenon. “The last few years have seen explosive growth of this part of the CRO industry,” Yang says. That growth is advantageous for pharmaceutical companies, he says, because the more CROs that enter the market, the broader the range of R&D services they can provide.
However, whether a foreign company opts to use a CRO depends on the company’s strategy, Tan says. Nevertheless, she says, most of the global pharmaceutical companies are moving to outsource clinical trial applications and clinical trial monitoring. It’s often a cost-effective move, especially if the company doesn’t have a local office in China.
Larry Harding, founder and CEO of High Street Partners, a company based in Annapolis, Md., USA, which helps businesses enter the China market, has observed that many U.S. executives who’ve spent a number of years in China and have great relationships with Chinese businesses have been leaving the corporate fold to become China consultants. Harding says as a result China’s “intense bureaucracy” and the somewhat subjective nature of what being in compliance really means, a CRO located there can provide benefits to the pharmaceutical industry that would not otherwise be available in other locations or countries. In general, he says, too many companies take a “ready, fire, aim” approach and send people to China with an insufficient front-end plan. A CRO can help ease the landing into more full-fledged operations.
Bamforth agrees. “Simply dropping someone into China and thinking that achieves relationships is a mistake,” he says. “It’s about having people there who truly have relationships and know how things work.”
Yang says that most, if not all, research-focused CROs, whose clients are often small companies, are started and managed by Chinese scientists who have been trained in or worked in the United States or other Western countries and who have extensive pharmaceutical experience. If CROs provide a great cost savings for companies who are either unable or not committed to establishing an office of operations in China, then is the prospect of reduced costs the real reason to conduct clinical trials in China?
The Allure of Lower Costs
The overall cost of a clinical trial conducted in China—compared to what it would cost in the United States—is 30 percent to 40 percent lower, due to lower labor and material costs.
Todd Hintze, health care principal of the health care practice of Everest Group in Dallas, Texas, USA, which matches buyers and suppliers in China, agrees that lower costs related to drug development have always been one of the allures of doing business in China. “But not everyone sees cost as the major issue,” he says.
When it comes to outsourcing, Hintze says a company should first understand what it’s trying to solve. In addition to cost, he says, other factors, such as speed and predictability, are also important. He suggests that the talent base in China is good, but not as deep as in other areas of the world, and that “good practices” are not always followed. And, he adds, patient recruitment and retention in clinical trials are tough in China, and as a result, may have an impact on speed to completion.
In addition to cost and speed, security can be a big concern, too. In more mature labs you’ll have robust security measures, which, for example, can limit the number of people who can enter and exit a facility, he says. “These types of security measures are not as pervasive throughout China.” For some companies, the prospect of lower costs may be eclipsed by speed, predictability and safety. Other observers have acknowledged these issues. However, they note that this industry in China is still growing, is not as mature as in other countries and that it will need more time to catch up to the West. “China is closing the gap,” he says.
Quality and Safety
Negative media coverage associated with Chinese-made ingredients, including the well-publicized case of contaminated heparin that found its way into drug supplies in several countries, may have dampened the enthusiasm to pursue China as an R&D center. However, evidence points to Chinese companies increasingly embracing quality outcomes and more stringent security measures. “The environment in China for intellectual property protection has been improved significantly,” Yang says. And, he adds, when Pfizer enlists the services of CROs, they must abide by Pfizer’s rules. “We encourage them to innovate so they can use their own creativity, but in all ways the CROs must abide by Pfizer’s quality standards, thereby bringing international standards to CROs.”
Pfizer is mindful of all the press coverage. “I spent a long time in the United States, so I can appreciate that,” Yang says. Therefore, Yang visits his collaborators on a regular basis, “just to see how things are going, and we have daily communications with them.” Pfizer also has project managers on the ground in China to coordinate research collaborations and monitor quality, and it conducts audits on the major partners’ facilities for environmental health and safety.
Through two separate joint ventures, Jeff Yordon, founder and chief officer of Sagent Pharmaceuticals, a manufacturer of generic acute-care injectables based in Schaumburg, Ill., USA, is currently building two manufacturing facilities scheduled to be operational in 2010 in Chengdu, a city of 17 million in the province of Sichuan. Yordon, a pharmaceutical industry veteran who has been doing business in China for more than 35 years, says there’s tremendous sensitivity toward finished products coming out of China because people believe quality control is not as valued there, in comparison with more regulated countries.
“There’s a tendency for the Chinese to believe that quality is a cost center, not a profit center,” Yordon says. The last pharmaceutical company he ran, prior to founding Sagent, had 1,800 employees, with 500 people monitoring quality. In contrast, one of his previous Chinese affiliates currently has 8,000 employees, with only 37 people in quality control. “We explained to them that in the United States the minimum acceptable standard is 100 percent, and that 99.9 percent is unacceptable,” he says. “That’s a new concept the Chinese are learning. They see what we’ve been allocating in terms of quality systems. It’s startling to them. They’re finally beginning to understand.”
Yordon concedes that, as Chinese companies tighten their controls, “their costs will go up significantly, so that they probably won’t be competitive in their local market.” However, he adds, if a company gets its foot in the door as a manufacturer with a solid reputation for safety, it can pave the way for R&D projects. “It gives them credibility to have other dialogues with any country in the world,” he says.
Any China-based manufacturing facility a U.S. company uses must be inspected by the U.S. Food and Drug Administration (FDA) and must meet all FDA guidelines. However, unlike in the United States, where the FDA can simply show up to conduct an inspection, the FDA gives facilities in China a three-month notice, giving those facilities ample clean-up time, Yordon says. That may all change soon.
By the end of this year, the FDA hopes to have opened three FDA inspection offices in China—in Beijing, Shanghai and Guangzhou—cutting down on the need for advance notice. China and the United States have pledged to more closely cooperate on safety issues. In published reports, U.S. Secretary of Health and Human Services Michael Leavitt said the offices are not only inspections outposts, but part of “a new strategy” on food and drug safety.
“The beauty of this,” Yordon says, “is that companies that are not capable of sustaining quality will simply go out of business. The higher the barriers to entry and the higher the standards, the better for manufacturing and research and development.”
Send us Your Comments
Web Exclusives
- Statistical Advantage
-
Gary Shorter, director of biostatistics for Quintiles, talks to Envisage editor Adam Istas about the growing importance of incorporating biostatistical analysis into all stages of drug development.
- Measure for Measure
-
A proposed Health Care Comparative Effectiveness Research Institute in the United States may force the biopharmaceutical industry to emphasize patient outcomes and quality of life issues when developing a new medicinal product.