SHANGHAI – Last week, a day before CPhI's China Pharma Week kicked off in Shanghai with thousands of foreign drug company reps in attendance, China's drug industry received some welcome news. The CFDA was accepted as a regulatory member to the International Council of Harmonization (ICH), an important step in China's ongoing journey to become a globally leading supplier and market for quality pharmaceuticals.

The ICH, perhaps not well-known outside of certain regulatory circles, is an influential nonprofit established in 1990 with the mission to enhance harmonization worldwide to ensure that safe, effective and high-quality medicines are developed and registered in the most resource-efficient manner. Harmonization is achieved through the development of ICH Guidelines via a process of scientific consensus with regulatory and industry experts working side by side. Key to the success of that process is the commitment of the ICH regulators to implement the final guidelines.

Founding ICH members are the U.S., EU and Japan. New to the game are "regulatory" members, like China as well as Brazil and Korea. As a regulatory member, China will learn the ICH guidelines and comb through its own regulations to find areas ripe for convergence and other areas where the rough edges of dissimilarity need to be sanded down. Much like China's entry in the World Trade Organization in 2001 – a highly successful move that ushered in China's era of export-driven growth – entry into the ICH will first require a period of painful adjustment that should lead to considerable market opportunities.

The timing is fortuitous. Chinese legislators are drafting a new Drug Administration Law expected to come into effect in the next year or two, and many of the CFDA's recent reforms conform to the ICH guidelines. During the DIA China session this year, there was widespread enthusiasm for China joining the ICH as well as acceptance that it will still take some time for China's system to change enough to be considered compliant with ICH guidelines. (See BioWorld Today, May 31, 2017.)

That will all help China eventually move from an industry dominated by API manufacturing to becoming a leader in the more profitable finished and innovative drugs for global markets.

CPhI and China Pharma Week

Signs of that shift could even be seen at CPhI & P-MEC China 2017, the acronym-laden trade show extravaganza that brought together a whopping 2,800 exhibitors greeting more than 40,000 visitors from 120 countries. For anyone trying to get a sense of the size and scale of China's pharmaceutical industry and supply chain clout, covering everything from APIs, fine chemical and intermediate, excipients and dosage forms, natural extracts and biopharmaceuticals all the way to packaging and laboratory instruments, this is the event to attend. Just be sure to come prepared with walking shoes.

Running alongside the trade show was CPhI China Pharma Week. Held for the first time, it sought to address China's changing pharma landscape, toward innovative, higher-quality products. A six-part conference series, Pharma Week focused on China's internationalization. At the kick-off event, the leading trade association for exporting Chinese pharmaceuticals (CCMHPIE), announced a list of its Top 100 Internationalized Chinese Companies in 2016, to recognize the most prominent global Chinese pharmaceutical enterprises.

As China's biotech industry is evolving rapidly, so is China's API industry, as Yin Li, product solution service consultant at Clarivate Analytics China, shared during her CPhI presentation.

China and India, linked by API

CFDA regulatory reforms have brought about a tightening of cGMP, environmental and occupational health regimes – so much so that API-makers have gone to receiving ever shorter advance notice of inspections to now finding surprise inspections a frequent occurrence. And the rise of social media platforms, such as Tencent's WeChat, means the public is no longer afraid of blowing the whistle on dirty producers.

For a variety of reasons, there have been shortages and supply interruptions, price increases and significant reductions in actual vs. expected plant capacity. That has put China's number one API customer, India, on edge. A large contingent of Indian firms attended CPhI, as part of a government organized delegation, many looking to mitigate the risk inherent in depending on Chinese API. India imports $3.8 billion in APIs, with 80 percent coming from China, namely paracetamol, aspirin, metformin, Pen-G, 6-APA, erythromycin and ofloxacin. Li reported that Indian firms are seeking backward integration – enticing Chinese API-makers to shift production to India or set up tech transfer agreements with Indian manufacturers. The government is sweetening the pot for Chinese firms with loans, offers of cheap land in India and one-time support to revive the production of certain drug intermediates. All in a bid to guarantee their pharmaceutical ingredient supply to feed their finished dose formulation (FDF) industry.

API-makers in China suffer from tight competition and slim margins, with many only able to see a 3 percent profit margin. The ones that have seen the changing tide are moving toward developing specialty products and more complex formulations. There is an increasing interest in rare diseases and orphan drugs, and the trend is toward biologics, biosimilars, antibody-drug conjugates and peptides, said Li.

Chinese firms are looking to move up the value chain, get out of the bulk business and into developing their own global brands. From the Chinese pharma perspective, India can be a good first stop on the path to going global, which was part of Shanghai Fosun Pharma Group's rationale in acquiring India's Gland Pharma Ltd. for $1.4 billion last year. (See BioWorld Today, Aug. 3, 2016.)