Chinese Law | China: Vol.3, No.03

Happy Chinese New Year

CHINA LEX PHARMA LAW NEWSLETTER

Vol. 3 , No.3 - February 6, 2002

TOPICS THIS ISSUE:

Recent Reforms Pose Problems for Foreign Firms
AIDS Sufferers Attack Tianjin with Syringes
30% of Domestic Pharma Firms to Drop Out in Next 5 Years
South Korean Conglomerate to Enter Chinese Pharmaceutical Market
AIDS Drug Manufacturers Offer to Cut Prices Again
Seibel Enters Chinese Market
List of China GMP Facilities (Continued)

Recent Reforms Pose Problems for Foreign Firms

Foreign firms are feeling pressure from the latest changes in the Chinese healthcare system.

Chairman of the EU Chamber of Commerce in China, Christian Velmer, said that the price caps that have lately been imposed have forced many foreign companies to stop selling drugs to Chinese hospitals.

The price caps have led to decreases as high as 80% in some cases. The Asian Wall Street Journal quoted an industry executive as saying the recent reforms are the biggest challenge the industry has ever faced.

Due to one regulation that prohibits the bidding on branded drugs, multinational pharmaceutical companies may also be excluded from bidding to sell medicines to hospitals, which accounts for 80-90% of all mainland China sales. Valmer says that this means that "the international pharmaceutical industry almost has no chance any more to make a bid."

Velmer hopes to hold talks with the SDPC (State Development Planning Commission) regarding the new price caps which have not yet been fully implemented. Although he admits that they have made some headway with the SDPC, "progress has been extremely slow with the Ministry of Health," he added.

The Chinese government is desperately trying to cut costs of its healthcare system. Recently, Beijing public employees discovered they would no longer have state-provided health care due to the far-reaching reforms.

Speaking about the latest changes, published on December 28, Velmer noted that "Nobody is very happy with all the changes, neither the hospitals, nor the public, nor the distributors, nor local manufacturing, nor the international industry."

Velmer and the rest of the international pharmaceutical industry hopes that in the next few months, the SDPC and MOH will see fit to revise the regulations.

While hoping that pressure from international manufacturing groups will help the Chinese government to change the recent reforms, Velmer also notes that much of the problem originates from within the Chinese healthcare system. Referring to the unusually high Value-Added Tax imposed on imported drugs, he says "I haven't seen any other country near 17 pct."

Comparing the recent price caps to the accession of China into the WTO and a subsequent opening up of the health services sector, he said "the government has to make a basic decision. Is it really interested in having a high-class RD-driven international and local pharmaceutical industry, or does it want to stop this vision and instead move to a low-cost generic driven pharmaceutical industry?"

(Source: AFX-Asia)

AIDS Sufferers Attack Tianjin with Syringes

In Tianjin, one of the largest coastal cities in China, Chinese AIDS victims threatening to attack pedestrians with syringes filled with HIV infected blood.

An Tianjin official said that "some young people went into the streets with needles but these people have already been caught by the police."

This is the first time that the mass plight of AIDS sufferers, who are usually found in villages where they were infected through the sale of blood, has come to China's larger cities. The Tianjin sufferers were reportedly showing their discontent with the high cost of medicine and the rejection of the state healthcare system to care for them.

Although China is trying to obtain reductions in the price of imported AIDS drugs, the patented drugs will likely still remain too costly for the majority of Chinese AIDS sufferers and may lead to a national decision to produce generic drugs.

(Source: Financial Times)

30% of Domestic Pharma Firms to Drop Out in Next 5 Years

The number of China's pharmaceutical enterprises is likely to be reduced by roughly 30% in the next five years due to restructuring of the national pharmaceutical market.

China's pharmaceutical industry is well-known as a "rising industry." However, it is generally recognized that the industry is not competitive enough. According to official statistics, there are roughly 5,000 enterprises preparing to compete side by side market-savvy multinational companies. Of these, there are about 1,800 Sino-foreign joint ventures.

A recent survey revealed that imported drugs and drugs produced by joint ventures make up one third of the market. Among the 50 best selling drugs in China, 40 are imported or produced by joint ventures.

So far, pharmaceutical corporations such as Pfizer and Bayer have already gained a solid basis in the Chinese market. In addition to setting up branches and representative offices, most of them have employed the policy of purchasing Chinese drug makers or setting up joint ventures and cooperative enterprises.

(Source: Xinhua News Agency)

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South Korean Conglomerate to Enter Chinese Pharmaceutical Market

SK Group, the fourth largest South Korean conglomerate, announced that it is entering China's pharmaceutical industry.

Cui Zhangyi, chief representative of the SK Groups Life Science Department, said they are buying a medium-sized Chinese drug manufacturer. In addition, they are establishing a research and development center in the Shanghai Zhangjiang Hi-Tech Park.

Cui Zhangyi said "this will be our first step toward making drugs in China. We do not plan to build a large-sized plant at the very beginning. Only after a few years of operation will we be likely to put in a large amount of investment." He noted that some investors had major misgivings concerning government policies.

SK also plans to use its Chinese network to distribute western drugs. As a major shareholder of Medicare, and through the promotion of the chain store in China, he hopes that SK will become a major player in the Chinese drug retail sector.

SK's history in China is relatively short, with their representative office only set up last year.

(Source: ChinaOnline)

AIDS Drug Manufacturers Offer to Cut Prices Again

Pharmaceutical corporations GlaxoSmithKline and Bristol-Myers Squibb are proposing to trade a cut in the price of their AIDS drugs for longer patent protection, as China is considering producing generic medicine.

Despite already cutting the price of the medicine over 30% last year, Squibb is willing to go even lower. Che Fei, of Bristol-Myers Squibb Co., China, said that "the new price cut must be greater than 30 percent." The State Development Planning Commission said they are considering the deal and will issue a report soon.

(Source: Asiainfo)

Seibel Enters Chinese Market

Seibel Systems is making a very large entry into the Chinese pharmaceutical industry this year. The Customer Relations Management (CRM) software giant expects to get involved with 10 large projects in the next few months.

By far the largest project is with Shanghai Roche Pharmaceuticals, which will involve over 500 Roche staff using Seibel software. Edwin Lo, managing director of Seibel's Greater China operations, said "This is the first full CRM project to go live for a major company in China's pharmaceutical industry."

Using Siebel's ePharma, a program tailored to pharmaceutical companies, Shanghai Roche is busy standardizing its efforts in sales and marketing nationwide. The software allows them to capture customer interaction from multiple sources including call centers, sales departments, analysis and reports, service departments, field departments and the Internet.

Edwin Lo said it was very important for them to do a high-profile CRM project with such a well-known company like Shanghai Roche because of the opportunities that the opening and deregulation of the health services sector will create in the mainland.

Industry experts estimate that the domestic pharmaceutical market will be worth US $26.37 billion by 2005 and will enjoy an annual growth rate of 15 - 18% over the next five years.

(Source: South China Morning Post)

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List of China GMP Facilities (Continued)

Name of Enterprise	Certified Scope
651. Sichuan Kelun Pharmaceutical Factory	High-dose injection
652. Shijiazhuang 1st Pharmaceutical Factory	Tablet, Capsule, Granule (Cephalosporin)
653. Zhejiang Kangle Group Company	Powder-injection (Penicillin), High-dose injection
654.Henan Wanxi Pharmaceutical Co., Ltd. by Shares	Granule, Pill
655. Hangzhou Minsheng Pharmaceutical Group Company	Powder-injection (Penicillin), Freeze-dried powder-injection, High-dose injection, tablet
656. Hangzhou Sanofi-synthelabo Minsheng Pharmaceutical Co., Ltd.	Freeze-dried powder-injection (anti-humor)
657. Shandong Xinhua Pharmaceutical Co., Ltd. by Shares	High-dose injection, Low-dose injection, Tablet, Capsule
658. Yangzhou Aosaikang Pharmaceutical Co., Ltd.	Freeze-dried powder-injection
659. Shangdong Lukang Pharmaceutical Group Company	Powder-injection(First branch factory)
660. Zhejiang Tianhuang Pharmaceutical Co., Ltd.	Capsule, Granule
661. Chongqing Runkang Pharmaceutical Co., Ltd.	Freeze-dried powder-inejction
662. Yangzijiang Pharmaceutical Co., Ltd. by Shares	Syrup
663. Zhejiang Jianfeng Pharmaceutical Co., Ltd.	Freeze-dried powder-injection
664. Shijiangzhou 4th Pharma Co., Ltd. by Shares	High-dose injection
665. Changshu Leiyunshang Pharma Co., Ltd.	High-dose injection, Low-dose injection
666. Arabindow·Tongling(Datong)Pharmaceutical Co., Ltd	High-dose injection
667. Jingsu Chenbai Pharmacetuical Co., Ltd.	High-dose injection
668. Anhui Tianyang Pharmaceutical Co., Ltd.	High-dose injection
669. Zhejiang Xinguang Pharma Co., Ltd.	Tablet, Capsule, Granule, Oral liquid
670. Zhangjiaguang Pharmaceutical Factory	High-dose injection
671. Xuzhou Enhua Pharma Group 4th Factory	High-dose injection
672. Nanjing Xianhe Pharma Co., Ltd.	Tablet, Capsule
673. Zhejiang Hisun Pharma Co., Ltd.	Powder-injection(Cephalosporin), Freeze-dried powder-injection
674. Guizhou Yikang Pharmaceutical Co., Ltd.	Tablet, Capsule
675. North China Pharma Group Company	Freeze-dried powder-injection
676. Shenzhen Jiuxin Pharma Co., Ltd.	Bulk (Cephalosporin)
677. Huangshan Tianmu Pharma Co., Ltd.	Low-dose injection
678. Zhuhai Schwarz Pharma Co., Ltd.	Tablet
679. Guangdong Bidi Pharma Co., Ltd.	High-dose injection
680. Jiangxi Zhuhu Pharmaceutical Factory	High-dose injection
681. Anhui Dadongfang Pharma Co. Ltd.	Low-dose injection
682. Shenyang Sansheng Pharma Co., Ltd.	Recombinant human interforn a2a
683. Foshan Kangbaoshun Pharmaceutical Co., Ltd.	Tablet, Granule, (Penicillin), Capsule
684. Shenzhen Xinlitai Pharmaceutical Co., Ltd.	Powder-injection (Cephalosporin)
685. Jiangxi Gannan Pharmaceutical Factory	High-dose injection
686. Anhui Bengbu Tushan Pharmaceutical Factory	Powder-injection
687. Anhui Xinli Pharmaceutical Co., Ltd.	High-dose injection
688. Jiangxi Changjiang Pharmaceutical Co., Ltd.	High-dose injection
689. Northeast Pharmaceutical Group Company Shenyang 1st Factory	High-dose injection
690. Shenyang Beilang Pharmaceutical Co., Ltd.	High-dose injection
691. Jiangxi Shangrao Kangda Pharmaceutical Co., Ltd.	High-dose injection
692. Guangdong Yongkang Pharmaceutical Co., Ltd.	High-dose injection
693. Jiangxi Pharmaceutical Co., Ltd.	High-dose injection
694. Jiangsu Kangqi Pharmaceutical Factory	High-dose injection
695. Zhuhai Union Pharma Co., Ltd.	Bulk (Penicillin, Cephalosporin), Powder-injection (Penicillin)
696. Guangzhou Xiangxue Pharmaceutical Co., Ltd.	Oral liquid
697. Handan Yongjun Pharmaceutical Factory	High-dose injection
698. Hebei Ruikang Pharmaceutical Co., Ltd.	High-dose injection
699. Jiangsu Huapeng Pharmaceutical Factory	High-dose injection
700. Shunde Shunfeng Pharmaceutical Co., Ltd.	Low dose injection, Oral liquid

Lehman Lee & Xu

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