The report is aimed at helping policymakers enhance understanding about the policies related to the pharmaceutical and biotech industries of China and India.

Overview

China has become the third largest pharmaceutical market worldwide and gained strong research capabilities in gene testing, cell therapy, and bio-pharmacy. Nevertheless, excessive regulatory control and dilatory approval procedures have hindered the innovative technology transfer and industrialization.

Reputed as the “pharmacy of the world”, India is the world’s biggest exporter of generic drugs and vaccines. Tailoring policies related to intellectual property, price control and foreign direct investment to the need of its pharmaceutical and biotech industries, India has established a sophisticated innovation system.

Main findings

• India’s loose intellectual property policy allows quick technology acquisition in the initial stage and flexibility of its patent regime contributes to the industrial development. India took advantage of loose intellectual property policy during 1970 to 2005 when domestic pharmaceutical companies mastered manufacturing technologies necessary for generic drugs. By applying a flexible TRIPS patent regime, India protects the interests of its pharmaceutical companies. Due to the lack of understanding and experience in patent law in the early 1990s, China adopted a stringent patent regime, thus less able to flexibly maneuver intellectual property policy to domestic needs.
• Incentive policies ensure the supply of advanced technology and talents. To stimulate drug innovation, the Indian government provides various tax benefits, funds, grants, etc. to entitled companies. The Chinese government has also offered a considerable amount of funds and grants to universities, research institutes and companies.
• A complete industrial chain enhances resilience to risks. India’s high dependence on certain key Chinese active pharmaceutical ingredients (APIs) puts public health and pharmaceutical companies’ survival at risk. In contrast, China has been emphasizing the sustainable supply of essential drugs, safeguarding each component in the pharmaceutical chain.
• A comprehensive and effective regulatory system is vital to the sound industrial development. To improve quality regulatory standards and increase the international competitiveness of India’s pharmaceutical and biotech industries, the Indian central government has introduced good manufacturing practices (GMP) standards for all manufacturers and bio-equivalence data for generics. The Government has also built pharmaceutical industrial parks to provide enterprises with shared testing facilities, production facilities, and environmental protection facilities. The Chinese government has kept optimizing the regulatory system by introducing stricter quality requirements in line with international standards.
• The industrial internationalization enables better integration of technology, human resources, and capital globally. With advantages in cost and English proficiency, Indian pharmaceutical companies actively engage in overseas business through product out-licensing, mergers and acquisitions. Through collaborating with multinational companies, India’s pharmaceutical companies have improved innovation skills and international business capabilities. A number of Chinese bio-pharmaceutical companies have also achieved international recognition in research and development. However, China’s industrial regulations in English are unavailable, making it difficult for foreign pharmaceutical and biotech companies to enter China.
• Medicine’s accessibility and affordability must be considered in the industrial development. Low drug price ensures affordability but discourages enterprises from investing in innovation. The Indian government adjusts the price policy, striking a balance between the interests of the public and enterprises according to its national priority. The drug price control mechanism in China is more complex involving measures of centralized procurement, social insurance reimbursement, etc.

Policy recommendations

• To optimize the regulatory system and promote regulatory communications between China and India. China should build an international and transparent regulatory system, paving the way for advanced foreign pharmaceutical products to enter the Chinese market. Smooth and close communications between the drug regulatory authorities of China and India should be set up to promote mutual learning and administrative competence. It would be helpful to establish an information sharing platform for Indian and Chinese pharmaceutical and biotech companies to understand the other country’s industrial policies and market regulations.
• To diversify trade and economic collaboration modes between China and India. The bilateral trade between the two countries in pharmaceutical and biotech areas should not be limited to APIs. Importation of India’s new advanced and sophisticated generics to China and exportation of China’s high-end medical devices to India should be encouraged to satisfy public health demands in both countries. Collaboration between Chinese and Indian pharmaceutical and biotech companies on new drug development, technology incubation and transfer, market access should be welcomed.
• To strengthen understanding and trust between China and India. Conferences and exhibitions for companies, industrial associations, universities and research institutes should be held regularly to increase mutual understanding and facilitate partnerships. More talent exchange and training programs should be developed.
• To make flexible use of patent law. Chinese pharmaceutical policy makers should do more research on the international patent regime and find ways to make it work for domestic interests. On the other hand, intellectual property protection, as a strategy to incentivize innovation and promote technology development, should be strictly enforced and defended according to current Chinese patent law.
• To optimize the innovation chain and establish a complete industrial system. It is important to build a complete and coordinated pharmaceutical and biotech innovation chain covering fundamental research, as well as technology innovation, incubation, transfer, commercialization and industrialization.
• To strike a balance between innovation incentives and public health. To encourage research and innovation, government should allow higher price and margin for new drugs and first generics, and meanwhile improve drug affordability by introducing aids and insurances.
• To encourage internationalization of enterprises and integrate global innovation resources. It is highly suggested that the local companies collaborate with multinationals in research and development to integrate international technology and talent resources and improve research and innovation capabilities.