New Generics Standards Aimed at Increasing Made in China Exports

China is raising the standard of its generics products in a move to help made-in-China drugs grab a larger share of the global market. As part of that process, however, industry observers expect that more than half of the drugs that are currently sold in the market will be eliminated.

The CFDA recently issued two announcements regarding quality and efficacy requirements for generics, including an evaluation procedure framework and a catalog of all generics that need to be tested by 2018. The authority had earlier issued guidelines requiring that all generics must ensure that their quality and efficacy are on a par with branded drugs.

"This is a drive to improve China's pharmaceutical industry. Our original standard of generics is too low," said Shi Lichen, director of Dingchen Pharmaceutical Management Consulting Center, a Beijing-based industry intelligence provider. "Currently, we are at the phase of correction."

The generics industry expanded rapidly a couple of decades ago as part of an expansion of the health care industry. Part of their appeal was the speed to which generics could get to market, Shi explained. There are now more than 4,800 pharmaceutical companies, and 95 percent of the 105,000 chemical medicines that have been approved are generics. Strictly speaking, there is no brand-name drug developed by Chinese companies, according to Shi.

"Some generic drugs are based on other generic drugs, rather than on brand-name drugs," he added, which leads to lower quality drugs flooding the market.

China now is one of the largest markets for generics in the world. Its neighboring country India is another. Statistics from Guosen Security show that the market capitalization of listed generics makers in China has reached ¥500 billion (US$76.2 billion).

However, the major difference is that India has become the major provider of generic drugs all over the world and large quantities of made-in-India drugs are exported to foreign countries.

"Our generic drugs cannot be found in countries like the U.S. because our quality cannot be in accordance with their standards, which are much higher. Many Indian products already get approvals from the U.S. FDA, while ours cannot. We could only digest them here, in domestic market," Shi told BioWorld Today. "We are still playing in a self-enclosed market."

Li Zhengqi, director at the Certification Committee for Drugs of the CFDA, argued in a report that the domestic generics industry has suffered from low quality products and poor profit margins of less than 10 percent. In comparison, the international standard is about 50 percent.

The poor quality is also a result of the difficulty of foreign import generics to enter the market; the competition is only among local manufacturers.

"Many have raised the issue of importing foreign generics – for example, from India – since last year. But there are strong opposing voices," said Shi, adding that it is understandable "as this will affect many people's interest."

Observers believe the new standard and evaluation is a reshuffle of China's pharmaceutical industry.

AN IMPORTANT REFORM

The evaluation will be rolled out in phases. The deadline for all generics that have been approved before Oct. 1, 2007 is the end of 2018. They are listed in the newly issued catalog and there are 289 drugs on the list in total.

For all generics undergoing clinical trials, all are required to be tested by the end of 2021.

"The quality and efficacy review is a little bit late but is necessary at this moment. Those inferiors will be gradually screened and the rest with good quality can then stand out and be competitive in international market," said Deng Zhouyu, an analyst with Guosen Securities, in a recent note to investors. "The policy is an important reform of our country's drug manufacturing industry."

"It expects that the review will eliminate 50 percent to 75 percent of current generics. Their effects cannot be equivalent to its brand-name drugs, or some are just safe pills but with no effect," said Shi. "The reform will largely benefit the public."

Echoing the Guosen Securities' conclusion, Shi predicted a promising future if the new policy can be followed strictly.

"In five years, the landscape of the global generic drug market will change. We will see more made-in-China generics used in other countries," he added.

That widespread elimination of generics also leaves room for the biosimilars business, which has been seen as a new pillar of the country's health care industry.

In March 2015, the CFDA's Centre for Drug Evaluation released Technical Guideline for the Research, Development and Evaluation of Biosimilars (Tentative) (Guideline). It gives a clear industry structure, in a move to promote the development of biosimilars.

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