China is a major player in the pharmaceutical industry, but it still falls short of being a true global powerhouse. With the rising barriers to new drug development and increasingly robust patent protection systems, Chinese pharmaceutical companies must confront a harsh reality: to align with international standards and strive for independent innovation in drug R&D, or risk being left behind.
From a production standpoint, China has significant capabilities. It holds the top position in formulation processing, ranks second in bulk drug production, and accounts for 25% of the global API market. Several chemical drugs, especially antibiotics and vitamin C, are produced in the highest quantities worldwide. However, when it comes to research and development, China lags significantly. Among the major drugs dominating the global Western medicine market, there are almost no patented products originating from China. The lack of intellectual property and the prevalence of product homogenization remain serious issues. Generic drugs are often produced by dozens of companies simultaneously, leading to market chaos, insufficient investment, and a cycle of low innovation rates.
According to Wang Xiaoliang, director of the Institute of Materia Medica, Chinese new drugs struggle to achieve "innovation." This stems from long-standing disconnects between scientific research, production, and the market during the planned economy era, which have hindered corporate R&D capabilities. In developed countries, drug R&D follows a market-oriented model, where basic research, development, industrialization, and commercialization are closely integrated and driven by enterprises. In contrast, China's system relies heavily on research institutes and pharmaceutical companies, with little collaboration. Research institutions handle basic and some developmental research, while companies focus only on part of the development and manufacturing process. This division, which has persisted for over 50 years, has prevented companies from building strong foundations for independent R&D.
The pharmaceutical industry is known for its high risks, high costs, and potentially high returns. Major multinational companies typically allocate 10-20% of their profits to R&D. For example, Pfizer invests over $5 billion annually in research, while AstraZeneca spends more than $14 million per working day. In China, however, R&D investment has remained at around 1% of total sales for many years. Meanwhile, advertising expenses can reach 5-10% of sales, largely due to an unbalanced distribution system and high sales costs. In foreign markets, over 80% of pharmaceutical sales return to the manufacturers, providing stable funding for future innovation. In China, only a small portion of sales reaches the producers, sometimes as low as 10-20%. As a result, companies often spend more on marketing than on R&D.
Experts suggest that the key to independent innovation lies in shifting the focus to enterprises as the main drivers. Companies should closely collaborate with research institutions, leveraging their scientific strengths while adopting market-oriented management. They should also build their own R&D teams with solid research capabilities. Additionally, it’s essential to boost company enthusiasm for developing innovative drugs and improve the overall pharmaceutical market environment. The current lack of new drug R&D is closely tied to the market conditions. Some high-quality drugs developed by regular manufacturers may take years to perfect, with excellent efficacy, but they face challenges due to higher production costs and weaker market competitiveness. As a result, companies tend to prioritize marketing over R&D. Only through a fair and purified market can innovation be truly valued.
Some experts predict that if 10% of national retail drug sales were allocated to new drug development, it could generate 200 billion yuan annually. This would mean pharmaceutical companies investing 20 billion yuan each year in R&D — more than ten times the state’s investment. In such a scenario, the development of “bombshell†new drugs with annual sales exceeding one billion US dollars is within reach.
Decontamination Cabin
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