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Indian Drugmakers Eyeing Chinese Market

Indian drugmakers, who came to the Chinese public‘s attention after the release of China‘s record-breaking film Dying to Survive last year, have been striving to make their foray into the world‘s second-largest economy at a faster-than-expected speed.

In July, Cipla, India‘s second-largest generic drugmaker by market capitalization standards, set up a manufacturing joint venture to make respiratory drugs in China with Jiangsu Acebright Pharmaceutical.

Cipla‘s EU unit, a UK-based, wholly-owned subsidiary of Cipla, will hold an 80 percent stake in the joint venture and Acebright will hold the remaining 20 percent, for a combined investment of $30 million.

Sun Pharmaceutical, another Indian drug giant, also entered into licensing agreements with China Medical System Holdings (CMS) to develop and commercialize two drugs in China. Tildrakizumab is used to treat psoriasis and a 0.9-percent solution of Cyclosporine A (CsA) is used to treat dry eyes.

According to statements the company sent to the Global Times last week, CMS will make an initial, upfront payment to Sun Pharma, followed by regulatory and sales milestone payments, and royalties on net sales. CMS will be responsible for the development, regulatory filings and commercialization of the products in China.

Another Indian multinational pharmaceutical company, Dr. Reddy‘s Laboratories, has already secured an early place in China. Its subsidiary, Dr. Reddy‘s (WUXI) Pharmaceutical Co, is in Wuxi, East China‘s Jiangsu Province, and its joint venture, Kunshan Rotam Reddy Pharmaceuticals Company, is also in Jiangsu Province.

Industry observers said they are also seeing more Indian companies eager to rush into China. “Many Indian drugmakers have approached me through various ways, asking me to find Chinese partners for them, in the hope of gaining an early foothold in the Chinese market,” Li Tianquan, co-founder of domestic healthcare big data platform yaozh, told the Global Times on Monday.

While setting up joint ventures is just an initial step, these ambitious drugmakers from India are clearly eyeing more, and looking to the opportunities that will follow through the years.

A Cipla spokesperson told the Global Times in an email on Tuesday that its current focus is on respiratory products through local manufacturing, while the company will also “explore various routes to build a portfolio of products in other therapeutic segments such as oncology.”

“We see China as a crucial part of our future growth roadmap,” the spokesperson said.

“Sun Pharma is planning to expand its China business in the future six to nine months, making the China unit contribute ‘some percentage‘ to the company‘s $4 billion of overall sales within three years from almost nothing right now,” Dilip Shanghvi, founder of Sun Pharma, also said in an interview with Bloomberg in May.

Time for India

China‘s structural reform in the domestic medical system is one of the major reasons these Indian drug giants are establishing themselves in China, industry analysts said.

Over past years, China has been releasing a series of measures to drive down drug prices, and speeding up approvals of new medicines to ensure they can reach patients and hit markets quickly, in a bid to provide domestic patients with cheaper and high-quality drugs.

Among all the rules, Li especially mentioned the method of consistency evaluation for generic drugs, which was released by the China Food and Drug Administration to evaluate the quality and effect of generic drugs. Li said that “the method has regulated domestic generic drug products, paving the ground for the imports of high-quality and price-competitive India generics.”

“Previously, due to the lack of a unified evaluation method in the country, the domestic generic drugs market was mixed. While with the release of the method, as generics made in China that could pass the evaluation are quite limited, Indian generics could stand out easily,” Li explained.

India, known as the “world‘s pharmacy,” is also currently the largest provider of generic drugs globally, accounting for 20 percent of global generic drug exports in terms of volume, according to a report published on the website of the India Brand Equity Foundation, a trust established by the Indian government.

It also has a comprehensive range of medicines – from everyday medicine used for colds and fevers to specific ones for serious diseases such as anticancer drugs. Indian drugs are generally of good quality. India is the country that has had the most drugs approved by the US Food and Drug Administration (FDA) outside of the US, with more than 100 types having received FDA approval already.

As such, with this internationally-recognized quality and cheaper prices due to low labor costs, the South Asian nation will no doubt become a competitive force once it enters the Chinese market, Li said. “It‘s the best time for Indian drug makers to compete for a place in the Chinese market.”

“Indian drugs are also cheaper than those from US and European firms, which dominated China‘s market for many years,” Li added.

Production costs in India are 33 percent lower than in the US, and the cost of labor is roughly half that of Western countries, a report from the India Brand Equity Foundation showed.

Meanwhile, India is also negotiating with the Chinese government for a faster registration process when importing drugs from India.

Additionally, the trade potential is huge. China currently imports a total of only $200 million of medicine products per year from India, accounting for about 1 percent of India‘s total exports in this industry, according to media reports.

Cooperate for mutual benefit

Cai Jiangnan, the director of the Center for Healthcare Management and an adjunct professor of economics at the China Europe International Business School, said that China and India‘s pharmaceutical industries have huge cooperation potential as they are complementary.

“India has accumulated mature experience in the generic drug-making sector. It has also formed a competitive and internationalized production process, as well as a mature management experience, which China lags behind and urgently needs,” Cai told the Global Times.

For a long time, the two countries‘ medicine trade stood at an initial level – China has been the largest exporter of raw medicine materials for India, and India has been making them into drugs to sell to foreign markets.

Nevertheless, with a closer relationship in the form of joint venture, Chinese companies could learn from their Indian partners to perfect and internationalize their drug-making abilities. India also has local partners who could help it navigate entry into the market, with great potential and profitability, according to Cai.

“There is a big opportunity for us,” Shanghvi, founder of Sun Pharma, said. “[The Chinese market] would create a significant new revenue stream, which is not factored in our valuation when analysts look at it.”

The Cipla spokesperson also talked about the growth potential of China‘s drug market, saying, “Respiratory illnesses frequently attack Chinese people, which is where our initial focus will be.” China‘s Asthma and COPD market is approximately $1.8 billion in size and is expected to grow to $3.5 billion by 2030, Cipla said, citing a report from IQVIA, a US company serving health information technology and clinical research.

Nevertheless, experts cautioned that India‘s “successful but controversial” generic drugs sector also indicates that there are limitations for its cooperation with China.

India‘s strong pharmaceutical industry grows under the condition that generic drugs in the country are not subject to a patent protection period – a condition that violates intellectual property rights and has drawn global criticism.

In April 2014, India was listed as the country with the worst compliance record when it comes to intellectual property protection, as noted in an annual review report issued by the Office of the US Trade Representative.

The two countries‘ cooperation will surely be agreed in accordance with the international drug patent law, which means many generic drugs made in India, while still within the patent protection period, could not come in China, Cai said. “China will never break the international drug patent law.” – Cedarpark Times