Former China FDA Chief on Biopharmaceutical Industry's Achievements and Challenges

Bi Jingquan says China's biopharmaceutical industry has leapfrogged in a decade but now facing daunting difficulties, including evaporation of $84.4 bln market value

Bi Jinquan is currently Executive Vice Chairman of the China Center for International Economic Exchanges (CCIEE), a state thinktank, and Vice Chairman of the Economic Affairs Committee of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC).

His career includes significant roles within the National Development and Reform Commission (NDRC) from 1994-2008. Subsequently, he served as the Vice Secretary-General of the State Council, China’s government cabinet, from 2008-2015.

Bi was especially acclaimed during his time as the top official of the China Food and Drug Administration (国家食品药品监督管理总局, CFDA) and later the State Administration for Market Regulation (国家市场监督管理总局, SAMR), which evolved from the CFDA. His 2015-2018 tenure in these roles was marked by significant achievements: clearing drug review and approval backlogs, enhancing the quality of generic drugs, and expediting the introduction of new drugs — maladies that had persisted in the Chinese medical system for over two decades. His bold and effective policies also earned him the accolade "变革者毕井泉 Bi Jinquan the Reformer."

Today's newsletter is an excerpt from Bi's speech at the 中国医药科技论坛 Zhongke Pharm S&T Forum in Beijing, on Dec. 16, 2023. The forum was co-hosted by the 中国医药企业管理协会 China Pharmaceutical Enterprises Association, General Office of the Chinese Peasants' and Workers' Democratic Party (CPWDP) Central Committee, and Zhongke Pharm R&T Productivity Promotion Center, Co. Ltd.

Before the part below, Bi told the forum that Beijing has high hopes for the biopharmaceutical industry

The Central Economic Work Conference emphasized the need to drive industrial innovation through scientific and technological innovation, particularly by leveraging disruptive and cutting-edge technologies to foster new industries, models, and dynamics, thereby developing new qualitative productive forces. It is crucial to vigorously promote new types of industrialization and establish several strategic emerging industries such as biomanufacturing, commercial aerospace, and low-altitude economy, while opening new tracks for future industries like quantum and life sciences. Strengthening applied basic research and frontier research, and reinforcing the principal role of enterprises in scientific and technological innovation is essential. The development of venture capital and equity investment should be encouraged.

Special attention must be paid to the concept of "driving industrial innovation with scientific and technological innovation" and "using disruptive and cutting-edge technologies to spawn new industries, models, and dynamics." Biomedicine is the most likely field for disruptive innovation. We should also focus on "establishing biomanufacturing and several other strategic emerging industries" and "opening new tracks for future industries like quantum and life sciences." The Center has elevated the biopharmaceutical industry to an unprecedented level, placing high expectations on it.

The original Chinese transcript is available on the official website of CCIEE. In this part, Bi Jingquan gave a summary review of the biopharmaceutical industry’s achievements and challenges.

Another part of his speech, namely his policy suggestions for the industry, will be posted in The East is Read, our sister newsletter. - Zichen

Pushing for high-quality development of China's biomedical industry

II. The biopharmaceutical industry in China is starting its journey towards high-quality development

In May 2023, President Xi Jinping emphasized during his inspection in Shijiazhuang, the capital of north China's Hebei Province, that the "biomedical industry is an emerging strategic one of great importance to the national economy and people's wellbeing as well as national security."

Such strategic status is the culmination of years of development within the industry and a testament to the collective dedication of professionals in China's biopharmaceutical sector.

Since 2015, under the leadership of the Party, China has reformed the drug evaluation and approval system by combating data falsification in clinical trials, raising drug evaluation standards, simplifying drug approval procedures, improving the efficiency of drug evaluation, advancing the consistency evaluation of the quality and efficacy of generic drugs.

Meanwhile, it has also implemented a drug marketing authorization holder (MAH) system [which separates drug marketing certificates from drug production certificates], established the drug patent compensation [which allows for the extension of the patent term for drug-related patents to compensate for the time taken in regulatory review and approval processes] and the pharmaceutical patent linkage [which "links" the approval for the marketing of generic drugs with the expiration of the patent period for innovative drugs], officially joined the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH), and facilitated the listing and trading of unprofitable biopharmaceutical companies.

The creation of the National Healthcare Security Administration in 2018 further expedited the inclusion of innovative drugs in China's medical insurance reimbursement list. This development underscores the pivotal role of medical insurance as a payment mechanism in supporting research and development (R&D) innovation in the biopharmaceutical sector.

Over the past decade, China's biopharmaceutical industry has achieved leapfrog development.

• Thousands of biopharmaceutical scientists have returned to China to start businesses and numerous professionals in biology, chemistry, medicine, and related fields have been recruited. Notably, the top ten biopharmaceutical companies in China have collectively created approximately 32,000 jobs. In terms of compensation, the salary levels for senior talents in China's domestic biopharmaceutical industry are now roughly on par with those in the United States.

• The number of innovative drugs has increased significantly. Since 2011, China has approved 510 types of innovative drugs for marketing, one-third of which are innovations by local companies. Of the 13,537 drugs in clinical research globally, 4,774 are developed or co-developed by Chinese companies, accounting for 35% of the global share, ranking second only to the United States.

• The quality of biopharmaceutical R&D has reached an internationally advanced level. Since 2016, Chinese companies have started licensing their newly developed drugs to multinational corporations, granting rights for the development of these drugs in overseas markets, or in some cases, transferring all rights to these international entities. In the past three years, an average of 30 types of drugs per year have been licensed by Chinese R&D companies. Since 2019, 11 types of drugs have been designated as breakthrough therapies by the U.S. Food and Drug Administration (FDA), and 11 have been approved for marketing in the United States, including three in the first three quarters of this year. A recent example of an external licensing deal was on Dec. 12, when Biokin Pharma reached an exclusive licensing agreement with Bristol-Myers Squibb, with a potential transaction value of 8.4 billion USD, including an upfront payment of 800 million USD, a near-term payment of 500 million USD, and milestone payments of 7.1 billion USD.

• The quality of generic drugs has significantly improved. As of Dec. 12, 8,088 generic drug specifications have passed the quality and efficacy consistency evaluation or have been approved under new standards, covering 1,122 varieties. Most of the commonly used clinical drugs have passed the consistency evaluation. Chinese patients now have access to generic drugs that meet advanced international standards and can effectively substitute original drugs.

• Particularly, during the three years of COVID-19, China was one of the first countries to develop and distribute vaccines, playing a pivotal role in the global battle against the virus. China's vaccines, test kits, and other supplies for combatting the pandemic have made significant contributions to the global fight against COVID-19.

• A large number of biopharmaceutical companies have grown rapidly. Industrial parks such as Shanghai Zhangjiang High-Tech Industrial Development Zone, Zhongguancun Science Park, Suzhou Industrial Park, and Guangzhou Economic and Technological Development Zone, which focus on the biopharmaceutical industry, have been greatly developed. Biopharmaceuticals have become an important new growth point for China's national economic development and a significant marker of China's transition into an innovative country.

The development of the biopharmaceutical industry, the market launch of innovative drugs, and the improvement of the quality of generic drugs significantly reduce the cost of some expensive treatment drugs, provide more options for clinicians, and bring new hope to patients, thus laying a solid material foundation for the centralized procurement of generic drugs and price negotiations for innovative drugs in China's medical insurance.

III. Emphasis must be placed on the difficulties and challenges in the biopharmaceutical industry

Despite progress, a significant disparity remains between China's biopharmaceutical innovation and the global forefront. Much of China's innovation in this sector tends to be derivative, characterized by following established paths, imitating, or adapting ideas from abroad. The relative scarcity of original new drugs featuring novel targets, compounds, or mechanisms of action points to a limited capacity for original innovation within the Chinese biopharmaceutical industry.

As a developing country, China embarked on its scientific development relatively late, and a process of learning, imitating, and following was inevitable. However, after years of progress, the country has established a strong foundational base. Acknowledging the current gaps and weaknesses is vital, as it propels China to redouble its efforts in learning, enhancing creativity, and diligently working towards creating an optimal environment for R&D innovation and original innovation.

It is also crucial to note the severe challenges in the biopharmaceutical field, such as weakened expectations, a sluggish capital market, and difficulties in corporate financing. These are influenced by global cyclical changes and domestic factors such as intense competition and bubbles in early-stage development. However, the primary obstacle remains the dual barriers that innovative drugs encounter in reaching clinical use: entry into medical insurance and hospitals.

(i) Difficulty in entering the medical insurance reimbursement list. A considerable portion of innovative drugs cannot enter the medical insurance reimbursement list because their proposed price reductions fail to meet the minimum requirements set by the medical insurance department. From 2021 to 2023, the price of new drugs was averagely reduced by over 60% through negotiation. In China, 90% of drugs are sold in hospitals and rural clinics, which is fundamentally different from abroad where 90% are sold in pharmacies. Without entry into the medical insurance reimbursement list, the sales of new drugs would be extremely difficult.

(ii) Difficulty in entering the hospital procurement list. According to a report released by IQVIA at the end of 2022, only about 10% of China's 3,300 three-tier hospitals [the highest level in the 3-tier system for Chinese hospitals] have purchased innovative drugs included in the medical insurance reimbursement list in the past five years, and only 5.4% of hospitals purchased innovative drugs included in the 2021 list. The situation in 2023 was worse than that in 2022.

(iii) Significant reduction in venture capital. In 2018 and 2019, early-stage venture capital and private equity fundraising in China's biopharmaceutical field reached 17.2 billion USD, surpassing the United States. However, it decreased to 16.2 billion USD in the 2020-2021 period, while the U.S. increased to 21.2 billion USD. As of September 26, 2023, China's amount dropped to 4.5 billion USD, an 84% decrease from 2018-2019, while the U.S. continued to increase. In the past three years, nearly 600 billion RMB in market value has evaporated from the biopharmaceutical sector of the Chinese stock market.

Innovative drug price reductions and the challenges in gaining hospital entry are discouraging investors from pursuing innovation in the biopharmaceutical sector. Unable to raise new investments, many new drug companies will not survive for long. Most of the innovative drugs and overseas licensing projects listed in recent years are the legacy of venture capital investment five years ago. A significant decline in venture capital will inevitably lead to a reduction in innovative drug outcomes in the coming years.