China, R&D Haven?

by Juan Francisco Pérez-Vargas

It all started with an egg. Inside that egg was P’an-Ku, who hacked his way out of the shell and cleaved the earth from the sky, and yin from yang, with his bare hands, creating the Universe. His children, Nüwa and Fuxi, created the human race and invented hunting and writing. Huangdi, the Yellow Emperor, virtually invented civilization, with innovations ranging from agriculture to the calendar, and, of all things, soccer (this is completely factual: the first mention of this sport is contained in the Zhan Guo Ze, a military and political maneuvering text from the 5th Century BCE). Following him came Shennong, the Divine Peasant. Back in those days, people’s diets consisted of what amounted to raw shellfish, herbs, fruits of dubious origin, and river water. Needless to say, people spent most of the time collectively sick to their stomachs, and Shennong thus took on the task of teaching people which fruits to gather, which fruits to avoid and —most importantly— which ones possessed medicinal qualities.

China’s pharmaceutical industry is, to say the least, unusual. The country represents 20% of the world’s total population, but its pharma market represents barely1.5% of the global market. The 1980s marked the collapse of the Rural Cooperative Medical System (RCMS), an innovative,

three-tiered system of medical attention consisting of barefoot doctors (trained in very basic first aid techniques and traditional Chinese medicine; think a nurse with acupuncture needles). The second tier consisted of township medical centers, staffed with western medicine-trained professionals. The first two tiers handled the most common ailments and general medicine, and a third, far more specialized tier consisted of county hospitals. The system was partially subsidized by the central government, and fees charged to patients were calculated based on the general population and income by province. The RCMS significantly improved life expectancy, reduced the infant mortality rate, and increased women’s health in general (villages were required to have a female doctor, as women felt uncomfortable being diagnosed by a man). The system was unsustainable, however. By the 1980s, the Chinese economy had shifted from collectivism to individual production units, effectively defunding the program and collapsing the healthcare system. After the state stopped subsidizing healthcare, doctors started charging patients, and things deteriorated rapidly.

By 2003, due to the disastrous effects of the SARS epidemic, the Chinese government had made an effort to

The general consumption of western-produced medicines has also increased dramatically in the years since the sweeping healthcare reforms began, and a growing middle class and higher incomes indicate that China will become the world’s second-largest pharmaceutical market.

re-reform the healthcare system, attempting to bring steady services to the rural population using a largely state-operated and heavily subsidized health insurance institution that managed to increase general coverage but was still lacking in quality and availability.

For decades, internal pharmaceutical production in China has been plagued by a range of problems and setbacks, including a general lack of quality, the population’s erratic geographical distribution (which in turn leads to countless logistical issues), clinical data manipulation, and very low levels of R&D investment. However, things have begun to change, and projections indicate that the Chinese market will grow to 170 billion dollars in 2023.

In 2015, Primer Li Keqiang, alongside the members of his cabinet, unveiled “Made in China 2025,” an ambitious industrial development plan that aims to transition the People’s Republic of China from a gigantic factory for cheap products to a manufacturing powerhouse for higher-end, higher-value goods. A combination of internal and external factors —such as environmental degradation, marked social inequality, an aging population, the aforementioned,

problem-ridden healthcare system and steep competition from other Asian countries with lower-cost labor— has forced the Chinese government to re-think its approach to economic growth.

In 2015, President Xi Jinping announced the beginning of a new global strategy called the Belt and Road Initiative (BRI), which involved multi-billion dollar investments in infrastructure throughout Europe, Asia, Oceania, and Africa, aimed at broader global market integration through land and sea corridors that seek to recreate the ancient Silk Road. Together with Made in China 2025, the BRI has stimulated investments and substantial development in major industries within the country with the lofty goal of entirely transforming the world’s economy by 2049, the centennial of the founding of the People’s Republic of China. The pharma industry is an instrumental area, whose growth and earnings will propel a necessary modernization of the health sector.

As of 2019, there are approximately 1,407 billion people in the People’s Republic of China, making it an unsurpassed source of Big Data: there are a variety of opportunities for studying rare diseases and certain types of cancer that afflict the Asian diaspora, as well as detailed genetic databases that can significantly improve the qualitative results of clinical testing. The general consumption of western-produced medicines has also increased dramatically in the years since the sweeping healthcare reforms began, and a growing middle class and higher incomes indicate that China will become the world’s second-largest pharmaceutical market.

In the year 2001, the People’s Republic of China became a member of the World Trade Organization, which accelerated the entrance of foreign pharmaceutical firms. Assisted by the above-mentioned reforms, these firms have begun to see the enormous investment potential in China: clinical trials have very competitive costs, a large pool of talent is stimulating the creation of R&D hubs, and Pfizer, GSK, Roche, Novo Nordisk have opened research facilities in Continental China. Despite increasing labor costs, the People’s Republic of China has all the ingredients necessary to become not only the paradise of smartphones, but the pharmaceutical industry’s Mecca.