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Is China's mounting red tape in the pharma sector just disguised protectionism?

23 April 2015 Sophie Cairns

Over the past few months, China's Food and Drug Administration (CFDA) has brought out reams of new regulations on far-flung corners of its pharmaceutical sector: multi-regional clinical trials, biosimilars, drug evaluation and approval and most recently, stem cell research. On the face of it, the rafts of new guidelines over the past six months are aimed at increasing transparency of a highly fragmented but rapidly growing sector.

But where there is red tape, there is usually delay, followed closely by frustration. Late last year, the industry group R&D-Based Pharmaceutical Association Committee (RDPAC) complained that stricter Chinese regulations on clinical trials could delay the drug approval process - already long at 6-8 years - by as much as another two years.

"Some of these investment plans are worth hundreds of millions of euros, and that's why this has caused a big reaction from our member companies," said Joseph Cho, managing director of RDPAC, whose members include such heavyweights as Johnson & Johnson, Bayer Healthcare, Pfizer and Sanofi. The backlog of drugs waiting for marketing approval in China had soared by a third in 2014 to over 18,500, the Center for Drug Evaluation (CDE), which is part of the CFDA, announced last month. This was in spite of the CDE stepping up the number of reviews it carried out.

Backlogs versus drug safety concerns
On the face of it, the CFDA appears to be caught between two stools. Faced with mounting anger from multinational pharma companies on the one hand, the CFDA has vowed to slash its approval backlog for foreign drugs within the next 2-3 years and speed innovative drugs to market. But at the same time, the CFDA has come under increasing pressure to clean up its self-described "grim" record in drug safety control, by stepping up regulations and oversight of its thousands of local drug manufacturers, many of which supply foreign pharmaceutical companies. The stricter oversight would include on-site inspections, random tests, and unannounced visits.

The CFDA announced its intention to step up regulations on manufacturers in January, shortly after the US FDA issued a warning letter to Novacyl Wuxi, a Chinese active pharmaceutical ingredients (API) manufacturer which is part of France-headquartered parent company Novacap Group. According to the FDA, Novacyl Wuxi committed basic manufacturing violations including data omission (FDA inspectors found a key chromatogram "in the trash") and changes made to an impurities test without proper documentation, relying instead on handwritten notes stashed in a drawer.

When does protecting standards become protectionism?
But as China juggles its promise to cut red tape and speed up marketing approval times for multinational pharma, at the same time that it increases regulations over pharmaceutical industry standards, two interesting points come to the surface.

First, the increased bureaucracy around marketing approval applies mainly to foreign companies. Domestic firms are largely unaffected, but in the meantime China's pharmaceutical market is awash with domestically-made drugs which have come to market with scant or much less strictly-regulated clinical trial data. There may be a hint of protectionism to this, especially when China has made it a priority to nurture national pharmaceutical companies capable of producing innovative treatments for export. It would not be surprising, given calls by China's National Health and Family Planning Commission (NHFPC) last year for domestic hospitals to use locally-made medical devices rather foreign imports, in order to speed up the development of the domestic medical device industry.

Second, despite renewed promises to facilitate access, Beijing continues to drag its feet over issuing visas to additional China-based US FDA staff (the US FDA opened an office in China in 2008 after counterfeit Chinese-made heparin APIs caused several deaths in the US). This foot-dragging - two years after an agreement was reached at the end of 2013 to allow more US FDA staff into China - indicates that Beijing's promises may have been more about appeasement than taking real action.

Given these examples, it is not a stretch to argue that Beijing's slew of new pharmaceutical guidelines are aimed not only at increasing drug safety, but also at protecting its national industry. Given that China is set to become the world's largest pharmaceutical market, delayed access might be the price foreign drugmakers have to pay to ensure future profits.

Sophie Cairns is a senior life sciences analyst for IHS
Posted 23 April 2015

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