The emerging markets - Central and Eastern Europe, India and China - are attracting increasing attention both as future markets and as sources for R&D. Of these, China is the one that appears to be pharma\'s greatest opportunity for growth.
As established markets in North America and Europe become more mature, companies are looking further afield for potential new areas of opportunity. And as the competition for patient populations and cost pressures increase, potential new locations to deliver clinical trials, as well as other elements of the R&D process are becoming highly sought after.
When assessing new markets for development, a number of factors need to be considered in relation to opportunity and the risks. When looking at opportunity, the relevance of the company's product offering to the disease burden, the proportion of patients able to access western medicines, the value of the market, and the likely rate of growth of the market as economic prosperity grows are all key factors.
The pharmaceutical market environment is also critical - to what extent is robust patent cover in place? How does pricing compare with other countries? How is healthcare funded - and how efficient and effective is the regulatory system?
Already, some 16 per cent of the world pharmaceuticals market is in emerging countries. Of these, China is the largest, already ranked number nine worldwide, ahead of Mexico, India and Russia.
Typically, pharmaceuticals expenditure increases in line with the GDP growth, so it is fair to assume that the pharmaceutical markets in all of these countries will increase ahead of the rates of growth of the established countries. China, in particular, is forecast to become one of the top five pharmaceuticals markets worldwide within ten years.
A question in the minds of many has been to what extent the Chinese patterns of disease are comparable with the West? In the major emerging economies (Turkey, Central and Eastern Europe, Latin America and Asia Pacific, including China), while infectious diseases remain a significant problem, the incidence of typical Western diseases, such as heart disease, diabetes, COPD and cancer is approaching levels of developed countries, and given the population base, the absolute number of sufferers is huge, particularly in China and India. So the attractiveness to pharma of the emerging markets is increasing, and within them China offers the greatest potential with a longer term target population second only to the USA, with an estimated accessible population today in excess of 100 million.
Critical to understanding potential, however, is the operating environment. If it is unfavourable, then the attractiveness will be limited. This is the case in India, where the local industry has established a low price structure and intellectual property (IP) approaching TRIPS compliance only came into force in early 2005. China is more competitive than India in this respect because IP law is better established, and China has developed a fair approach to taking into account quality and innovation when setting prices. Challenges remain in the enforcement of IP especially given the size of the country, but the number of lawsuits is increasing and the intent to enforce appears h3. A related area of concern is counterfeiting. Again, the issue concerns the enforcement of legislation. This is an area where ongoing vigilance is vital, but there are increasing examples of successful prosecutions of counterfeiters.
From the point of view of regulatory approvals, China has historically been less competitive than many other emerging markets, because of the need to have already launched in one market before starting clinical trials for launch in China. This has meant a delay of some 3-4 years after first global launch before a medicine reaches Chinese patients. This is an area in which the industry is keen to work with the Government, as is reimbursement, which at national and regional level can cause a further two years of delay before broad access to new medicines for patients is achieved.
Political and economic stability is another fundamental element in determining market attractiveness for investment and sourcing. There is no doubt that the economic development of China, in the recent past and predicted for the next ten years, is unprecedented. Concerns remain about the ability to manage, for example, urban-rural tensions and international relations, but the outlook remains favourable over the long term.
Taking the economic growth of China, the prevalence of western diseases, an improving operating environment and absolute size, China is an attractive market relative to other countries where companies are increasingly interested to invest.
AstraZeneca has been present in China for a number of years, with a plant in Wuxi. In 2005, the company was the leading multinational provider of prescription medicines to Chinese hospitals.
When assessing a country as a potential location for clinical trials, a number of factors apply, which overlap with commercial considerations. For example, given that data will be used to prepare medicines for use throughout the world, a background of political and economic stability to enable timely study delivery of data is vital. IP protection and enforcement for work on compounds prelaunch is even more critical than for inline brands, and it is important to be able to access significant patient numbers speedily, and to be confident that the studies will be conducted to FDA and EMEA standards. Patient safety is paramount, and it is critical that an ethical framework is in place to safeguard this.
Clearly one attraction to working in emerging markets is to potentially lower the costs of trial delivery relative to developed countries, but it is important that this is sustainable. It is also important that the regulatory framework allows the timely start-up of studies, and that ways of working between the sponsoring company and the study centres are compatible.
As for the commercial world, the politico-economic environment in China is seen as good, and it is improving. There is still concern about the enforcement of IP protection, although confidence in this area is also improving. Consistent improvisation will be critical to the attractiveness of China for R&D investment in the long term.
The skill base in China is very h3, particularly with the increasing numbers of returning Chinese in senior positions, and the patient population available for access is very large. Particularly attractive is the concentration of large numbers of patients in key centres, making it possible to recruit patients more efficiently.
Today, as in India, the cost of operating in China is attractive - at less than half of the cost of running studies in Western Europe. The expectation is that this will be sustained over the next 5-10 years, but experience in Central and Eastern Europe indicates that the differentials will reduce over time.
Delivering to global standards is a major concern and one area where there is limited experience so far. India has an advantage over China, being English speaking. However, AstraZeneca is building learning in China by using qualified staff on the ground to work closely with its centres.
Another area of competitive disadvantage for China historically has been the lead times to approve clinical studies, which are long relative to other countries, and the fact that, for example, blood samples cannot be taken out of China. Improvements in these two areas will improve China's competitiveness.
AstraZeneca has been conducting studies in China since 1996, and opened its East Asian Clinical Research Unit in Shanghai in 2002. Up to mid 2005, 34 studies had been conducted in China, including 12 global, involving 617 centres and some 15,000 patients. The experience so far has been positive, with Chinese centres delivering to AstraZeneca Global Standards, and the intention is to continue to expand.
China is a country that is growing with unprecedented speed, and where the unmet need for medicines for western health problems such as heart disease and cancer is large and increasing. The talent pool to conduct R&D within China is significant.
If China can continue to ensure a fair approach to the pharmaceuticals environment including pricing and reimbursement, can improve enforcement of IP in the future, and can continue to develop the skill base and regulatory environment for R&D, this country will become increasingly competitive and multinationals will be more than happy to support the national goals to build excellence in science and technology. This is an area where there is a real opportunity for partnership between multinationals and China for the future.
