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MA holder reform and competitive landscape in China’s pharma sector
On January 12, 2016
This post was first published in the December 2015 issue of our healthcare newsletter China Healthcare Deals+Strategies.
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As part of its efforts to increase the efficiency and product quality in the pharmaceuticals industry, the China Food and Drug Administration (CFDA) issued the final draft of the Pilot Plan on Marketing Authorization (MA) System on November 6. The same week the CFDA also announced the three-year pilot program covering 10 provinces and cities would commence on December 1, 2015.
Being one of several regulations introduced by the government in recent years, the new MA guidelines have received relatively limited attention. But looking in more detail at the regulations it is clear that they will have a significant impact on the product development strategies of pharmaceuticals companies in China.
Currently only China based manufacturers of pharmaceuticals are eligible to hold market authorizations in China. Under the new guidelines China domiciled R&D organizations and Chinese citizens will also be eligible to become MA holders. A key rationale behind this move is the desire to increase the incentives for research and stimulate the development of indigenous innovation.
The changes will have a significant impact on product strategies and viable business models in China’s pharmaceuticals industry.
To summarize the impact on different types of organizations:
R&D organizations: R&D organizations will now be able to hold the MA for products they develop without investing in manufacturing facilities. Their bargaining power visà-vis manufacturers will increase, potentially allowing them to reap greater rewards from their investments.
Speciality pharma companies: It will be possible for R&D organizations and/or companies that are strong in product development and regulatory affairs to build up a portfolio of products without the need to invest in manufacturing.This is likely to lead to the emergence of speciality pharma business models with outsourced manufacturing.
Established Chinese pharma companies: The new regulations will have a significant negative impact on many established players. The majority of Chinese pharma companies are struggling to expand their product portfolios. In the past, pharma companies have been in a strong position as R&D organizations were dependent on partnering with a manufacturer to commercialize products. The new guidelines will make it more difficult, or at least more costly, to obtain new products.
Contract manufacturers: Demand for services will increase. A likely short term consequences will be that Chinese pharmaceutical companies with spare manufacturing capacity will develop contract manufacturing offerings. In the longer term we could also see the emergence of pure CMO’s in China.
Foreign Pharma companies: Increased options for innovative companies; limited changes for big pharma. The new rules will most likely make it possible for foreign companies to work with Chinese research organizations and contract manufacturers to file for domestic drug approvals instead of following the imported drugs route.
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