Can Western Pharma bring biologics to China? Yes, if the price is right, say CEOs

Biologics are the next challenge for multinationals looking to enter the lucrative Chinese market, but such drugs must offer value and genuine innovation, say the CEOs of Merck KGaA and Chi-Med.

“Referring to China as an emerging market is a bit like referring to Google as a new economy,” said Stefan Oschmann, CEO Pharma at Merck KGaA, during a panel discussion discussing new market opportunities at last month’s FT Global Healthcare and Biotech Conference in London, UK.

Approximately 40% of the Germany-headquartered firm’s revenues come from markets which are generally described as ‘emerging,’ with China being a major focus of investment for the Merck Serono division.

Last year China's healthcare spend was around $132bn, up from $5bn in 2000, the panel said but for multinationals looking at entering this lucrative market the challenge is to offer high quality branded products at affordable prices, according to Oschmann.

“Traditionally business [in China] has relied on classical medications which are off-patent medicines,” he told delegates. “That has worked for a number of companies pretty well, but going forward the challenge is to introduce successfully biologics. This is where we are seeing a mixed result across the industry.”

So far Merck has expanded into the region with a €150m ($188m) R&D centre and is building an €80m small molecule drug plant in Nantong , but is yet to have invested in biologics capacity. However, the firm is expected to capitalise on the demand for life science tools and supplies in China through the planned $17bn acquisition of Sigma-Aldrich .

Also on the panel was Christian Hogg, CEO of Hutchinson China MediTech (Chi-Med) – a firm which signed a co-promotion agreement with Merck Serono to market cardiovascular prescription drug products in China in October – who was unconvinced Western companies will find a market for their biologic drugs in China.

“So many targeted therapies monoclonal antibodies are not appropriate for China,” he said. “There’s no point in coming to China with a $10,000 per cycle targeted therapy as 1.4 billion people won’t be able to afford it.”

Branded Generics – A Waste of Time

Hogg was also scathing of multinationals pushing branded generics in the country. “You are wasting your time with branded generics as there are high numbers of Chinese pharma companies whose manufacturing qualities in generics are improving daily.

“You can’t charge  30-50% more for a multinational brand name on the same product that’s being manufactured by a local Chinese company,” he continued, adding this has led to much of the corruption among Big Pharma firms in China in the past few years, as they try to push physicians to prescribe their more expensive local drugs.

Instead, Western pharma should bring “genuine innovations that are accessible to the people of China” in order to compete, and overcome hurdles such as support from the Government.

“It’s about value. Give them products which are relevant, affordable and sensible and you will get all the support you need.”