3. MARKET PRICING An independent agency established by the government should perform health technology assessments (HTA) on new drugs to ensure
that actual value is created. This can help focus the industry on innovative products, and restrict me-too drugs that add
no new value to the society. This is especially important as more chronic disease emerges in china as the population ages,
affluence increases, and urban life becomes more prevalent.
Market pricing encourages the development of a strong, innovative industry focused on bringing new products to market that
fill new needs or represent novel therapies. Conversely, significant pricing regulation risks driving the industry to a low-cost
manufacturing model, which diminishes value and inhibits innovation.
Growth beyond Tier 1. Tier 2 and 3 markets doubled in 5 years
4. IMPROVING TRANSPARENCY AND SPEED Regulatory and reimbursement processes must be overhauled to improve the transparency of new product approval and increase
speed to market. The application and approval process for imported drug registration is a maze of complicated requirements,
which pose serious challenges to any company seeking timely access to the Chinese market. Decision-making must be centralized—and
the frequency of updates to the national reimbursement list (NRL) increased—if Chinese patients are to receive access to innovative
Pharmaceutical companies can help the government identify and execute ways to streamline and improve these processes—by using
standard dossier formats from the United States and European Union, for instance.
5. IMPROVING DISEASE MANAGEMENT Adopting global clinical diagnosis and treatment guidelines, and streamlining the decision-making process surrounding disease
management, help both physicians and payers. Tax breaks for the pharmaceutical industry could fund and encourage more extensive
disease awareness programs in key urban areas. The pharmaceutical industry could play an important educational role, deploying
sales teams to communicate guidelines and help instruct physicians.
6. PROFITING FROM PARTNERSHIP Government–industry partnerships can bring new technology and greater self-sufficiency to china, accelerating the growth of
indigenous pharmaceutical companies. Moreover, a mentoring relationship can help increase employment and lower the cost of
manufacturing as well as R&D.
In exchange for pricing or volume concessions on innovative products, pharmaceutical companies can transfer technology and
knowledge, sharing with the government best practices in manufacturing. Companies can flex their muscles in R&D, too, by involving
government labs, local innovators, and medical institutions in early-phase product development. This strategy leverages China's
developing strengths in early, pre-clinical research and avoids time-sensitive research activities such as later-stage development.
Working with the government can spur much-needed reforms in China's healthcare environment, but pharmaceutical companies must
take other actions as well to unlock growth in this market. Investing in China is one road many foreign multinational companies
are choosing as they strive to create a localized infrastructure to ensure new avenues of growth and to create competitive
Case in point: AstraZeneca has made significant investments in its sales force in preparation for expansion into new city
markets. More than 2,000 hospitals in 120 cities are being covered by a growing army of sales representatives, who cost the
company an average of $30,000 per person per year. Investments such as these are offset by the additional revenue generated
each year per rep. In larger cities, this could be as high as $200,000 per person or as low as $50,000 in smaller urban areas.
The company also intends to invest $100 million in R&D in China, opening the AstraZeneca Innovation Center China in 2009.
This is on top of $134 million invested in 2002 in a manufacturing plant in Wuxi and a clinical research unit in Shanghai.