Why China‘s new legal framework will be a magnet for global pharmaceuticals
Nick Beckett, managing partner and co-head of CMS Life Sciences & Healthcare Group writes about China’s approach to attracting global pharmaceutical and digital health companies.
China is the world’s second largest healthcare market and it’s growing at a rapid rate. It could become a $1 trillion industry by 2020, according to McKinsey. As a developing country with a huge population, the government needs to ensure its citizens are looked after, and the upcoming challenge is an unprecedented one. By 2050, 80% of the world’s elderly will be Chinese.
International pharmaceutical companies and tech giants recognise the opportunity that China presents, but few have been successful in establishing a meaningful presence in the country. The central reason is because China’s laws have historically been unfavourable towards international players, and in particular there has been concern about the lack of protection as regards intellectual property (IP) rights. Likewise, global corporations will only be successful in China if they spend time in the country to understand local values.
This is changing through China’s focus on healthcare innovation, in particular digital health. The goal is to create Chinese global healthcare champions that can compare with success stories like Baidu, Alibaba and Tencent in the tech sector.
To make this happen, China is looking to attract global pharmaceuticals and tech companies to encourage collaboration with local corporations. The catalyst is an improved legal infrastructure enabling foreign companies to uphold their IP in specialist courts – a reassurance that is greatly needed. Further, Chinese authorities are designing an equivalent to the “Patent Linkage” regime of the US that notifies patentees of impending drug registration applications. Patentees could then respond should their patent rights be infringed. The drug evaluation authority would have the power to suspend the application by up to 24 months until a settlement or valid judgment has been reached.
Similarly, the new draft amendments to the PRC Patent Law published last December introduced an extended regime whereby a protection term of up to five years may be given to an inventive patent of a drug that has simultaneously applied for marketing in China and abroad.
In 2017, the National Medical Products Administration joined the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use. This was widely considered a significant step towards the internationalisation of the Chinese drug approvals process.
What’s more, the government has rolled out several policies to encourage innovation, including Made in China 2025; Healthy China 2030; the Three-Year Action Plan to Encourage the Industrial Development of the New Generation of AI; and a special plan within the 13th Five-Year Plan to create a biotech industry that will account for more than 4% of its GDP by 2020.
Additionally, it is building a healthcare workforce among its own population. This includes attracting its “Sea Turtles” (Chinese students who have gained a university education abroad) back to innovate at home.
China’s plan is coming to fruition. There is more collaboration between Chinese and foreign companies. One example is Airdoc – a result of a Chinese company and Microsoft joining forces to create AI technology that aims to prevent diseases. It is a cloud-based algorithm that uses retina scan images to detect susceptibility signs, and the results can be sent to the patient’s phone within seconds.