West Moving East
As Western firms are beset by the high costs of conducting clinical trials at home and rising failure rates for potential
drugs, many are now discovering that China offers significant cost advantages. A new cadre of clinical research organizations
(CROs), led by Wuxi Apptech in Shanghai, is working closely with Western firms to accelerate drug development and lower the
cost of moving new therapies from lab bench to bedside. Until recently, winning approval for drugs in China took far longer
than in Europe or the US—a legacy of China's past, when it focused primarily on screening established generic drugs. But the
State Food and Drug Administration (SFDA) is indicating that it will begin to loosen standards for first-in-human drug trials
and for accelerating the use of Chinese patients in global clinical research trials.
Already, the rapid outsourcing of clinical trials from Western labs to Chinese-based CROs is helping Chinese researchers gain
deeper experience in working with Western models of drug development and raising their credibility. The "cheaper and faster"
differentiator that led to the first boom in CRO investment is also likely to lead to knowledge-based improvements, as clinical
centers rapidly move "upstream" into more basic research and discovery.
BGI hopes to make its mark combining basic research collaborations with innovations in "pure science," while earning funds
through collaborations with more established firms. "This is big science, which requires attacking genome sequencing in an
industrial way," said BGI co-founder Yang Huanming, who earned his PhD from Copenhagen University in 1988 and received his
postdoctoral training in France. "Only with a large scale can we do big jobs at relatively low cost."
But BGI is also investing aggressively in developing the software needed to better analyze the output from raw genetic sequencing.
To that end, it is hiring dozens of young software and computer engineers to help build a sophisticated platform to analyze
the torrent of data its genetic sequencers are uncovering. Many of these are computer "hackers" who lack formal education
but have become highly skilled in understanding and writing sophisticated computer code.
"This field is so new," Dr. Yang explained, referring to the rapid sequencing of genetic code and the need to build the best
software to read it. "It makes sense to hire raw and talented computer experts who are ready to accept risks and try new experiments
to find breakthroughs."
Challenges to China's Rise
While China's rapid acceleration toward life sciences leadership is impressive, a myriad of obstacles remain. The speed at
which China addresses these issues will determine the pace of its global impact on the industry.
If the future lies in biologics, China will need a clear regulatory pathway that drug developers can follow. And it will
require more than the current handful of experts at the SFDA Center for Drug Evaluation in order to evaluate new large molecules.
Clinical trial approvals:
Delays of 12 to 18 months for permission to conduct clinical trials represent a major challenge to the speed of drug approval.
SFDA is working to accelerate the current timeline, but at the same time the agency is debating fundamental changes in its
overall approach. Such changes may allow Phase III trials to act as the first step in a progressive launch that covers an
increasing number of hospitals and patient conditions with rigorous, ongoing post-launch surveillance.
While China has developed a track record for protecting locally registered patents (to the chagrin of some firms who ignored
China in their original global registrations), the innovation free-for-all now under way is frequently characterized by both
a lack of adequate scientific documentation and a lack of IP protection. It will take time to strengthen these disciplines
and to develop stronger protection in such areas as know-how and data exclusivity.
Ruthlessly driving down generic drug prices is a key pillar of the initial phase of healthcare reform, designed to meet the
most basic needs of China's 1.3 billion people. Many firms are beginning to question whether expanding their portfolios to
include an even wider range of branded generics is the right strategy. At the innovative end of the drug spectrum, the government
has begun to consider alternative approaches to balancing public needs with the economic incentives needed to drive innovation.
While most Western drug firms assume innovation can only occur where high prices are allowed, China may well come up with
different models—for funding research and compensating drug makers—that are unique to China's emerging role as the world's
largest single-payer healthcare system.
Whether in manufacturing or execution of clinical trials, China's success as a global player will depend on dramatically
improving standards in virtually every part of the value chain. Fortunately, this shift may begin to materialize faster than
anticipated. China's new Good Manufacturing Practice standards are close enough to global specs that most companies building
new plants are committed to going the extra distance required to obtain US FDA certifications.
George Baeder, a Shanghai-based partner at Monitor Group, leads the firm's Life Sciences practice in Asia. He can be reached at George_Baeder@Monitor.com