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Newsletter: Chinese Health & Medicine by Lehman, Lee & Xu , BeijingCHINA HEALTH SCIENCES NEWSLETTERTOPICS THIS ISSUE:
Government Gets Tough on Drug ManufacturersLaw enforcement chiefs cracked some 480,000 cases of manufacturing and marketing of counterfeit drugs with a market value of RMB 470 million (US $56.8 million) last year. Zheng Xiaoyu, director of the State Drug Administration, disclosed the statistics during a group discussion at the ongoing session of the Ninth National People's Congress (NPC). He said that more than 1,300 manufacturers were forced to halt production to allow for restructuring to meet the national quality standards, and more than 8,600 illegal drug distributors were permanently shut down. The government has pledged to reinforce its zero tolerance campaign on unqualified or illegal medicine manufacturers, and will "be very cautious over the establishment of new plants" in a bid to regulate the market. "The State Council has paid great attention to the issue of counterfeit drugs in the market. We have reformed our supervision system to fortify control over the market since last year," Zheng said. Zheng said the administration will shut down about half of existing healthcare product manufacturers this year, leaving approximately only 1,300. "These manufacturers, which have sneaked into the market due to slack government control, fail to meet the national quality standard. They must be closed to prevent rampant counterfeits and unqualified products from going on sale to the public," added Zheng. (Source: china.org.cn) Pharmaceutical Industry Preparing for WTO CompetitionChinese medicine distributors have three years before their foreign counterparts can freely enter the market. According to China's commitments to the World Trade Organization, the medicine retail and wholesale business will be opened to foreign investors with no capital or geographical limitations within three years of China's December 2001 WTO entry. During the three-year waiting period, joint-venture trials will be limited in the key cities of Beijing, Guangzhou and Shanghai. Under the trials, any foreign trader can apply to the State Economic and Trade Commission to set up a joint venture if the company's assets reached US$ 200 million the year before the application and the annual turnover reached at least US$2 billion in each of the previous three years. Companies in China's central and western regions will have a lower threshold. For joint-venture wholesalers, the Chinese partner must own at least 51 per cent of the venture. The majority of China's medicine-distribution enterprises are not competitive. The industry has been hampered by government control for decades and different pharmacies began merging into chain stores in only the past five years. By the end of last year, the number of authorized drug wholesalers in China reached 17,000 with 120,000 retailers. In the United States, there are 50,000 medicine retailers but as few as 70 wholesale companies. Wang Jinxia, chairman of the China Medicine Commercial Association, said the industry is crowded with small companies but is short of conglomerates. Yu Mingde, deputy director of the State Economic and Trade Commission's Economic Operations Bureau said that to face the coming challenges, the government will encourage mergers in the sector, and key enterprises will be encouraged to build large enterprise groups. Yu predicted that 10 conglomerates will emerge in the next five years, each with more than 1,000 outlets and a turnover of RMB 5 billion (US$ 604 million). Chinese medicine distributors have three years to improve their performance before foreign distributors can freely enter the market. To date, more than 60 of the domestic companies attempting to get a stronger foothold on the national pharmaceutical market have been granted approval to operate branches nationwide. (Source: China Daily)
Counterfeiting in the Pharmaceutical Industry Although the Chinese press is not blind to counterfeit or sub-standard drugs and pharmaceuticals, the focus usually remains on local victims of the trade, and does not often concentrate on the manufacturers themselves. In 1996, when sub-standard medicine killed 89 children in Haiti, it was found that the source of the medicine was a trading company in China. How exactly the anti-freeze was used in the medicine remains a mystery due to the complexity and vagueness of the transactions. However, the Haiti case remains a scary reminder of the presence of counterfeiting in the pharmaceutical industry in China. Raids on Chinese warehouses regularly turn up export bound cartons filled with fake drugs labeled with multinational trademarks, and State Owned Enterprises (SOEs) are known to manufacture and export counterfeits. As the profits from selling counterfeit medicines can often be as high as the sale of narcotic drugs, it is thought that organized crime has become involved in the China fake drug industry. Harvey Bale, Director-General of the International Federation of Pharmaceutical Manufacturers Associations (IFPMA), said that organized crime faces "less risk in moving into counterfeit medicines than illegal drugs." Some counterfeiters even appear to have government protection as officials and People's Liberation Army (PLA) members, who supposedly were previously involved in the actual manufacturing and distribution of the drugs, tip counterfeiters off about upcoming raids. While companies are increasingly using sophisticated anti-counterfeiting methods, such as holograms, embossed logos and sealed packets for their drugs, counterfeiters are becoming equally sophisticated in the use of high technology to copy the anti-counterfeiting mechanisms. Some estimates suggest that the counterfeit pharmaceutical goods market in the United States alone amounts to between US $16 and US $48 billion. In China, the situation is much more desperate with half of some types of drugs being counterfeit in the China market. (Source: World Markets Analysis) Government Comments On Medical Insurance, Health and Drug IndustryChina's medical insurance program extended benefits to about 76.3 million employees last year. The Ministry of Labor and Social Security said that due to effective methods undertaken by the government, the number of employees covered by medical insurance had increased by 32.98 million in 2001. In 2002, the government hopes to expand its medical insurance program to cover employees in foreign-invested and private firms. Ministry officials also said that firms should be paying their employees' medical insurance premiums and if they are found to be not doing so, they will be punished. China's health and drug authorities have also begun a nationwide campaign against the re-use, production and marketing of brand-imitation and substandard disposable syringes and other medical devices. The Ministry of Health requested that all hospitals and medical units only use standard medical instruments and do their best to prevent any discarded instruments from being re-used or re-marketed. The ministry is drafting a new set of regulations on how to prevent cross-infection between hospitals. The draft will set up detailed and strict rules on the purchasing, use and destruction of disposable medical instruments. Official statistics show that about 5,000 firms make medical instruments in China, with a total output of RMB 30 billion (US$ 3.6 billion) a year and an average growth rate of 18% . (Source: HK Edition) Tenth 5 Year Plan for the Pharmaceutical IndustryAccording to the tenth 5-year plan (2001-2005) set for the development of the pharmaceutical industry, China will maintain the following annual growth rates in the next 5 years up to 2005. They are:
According to industry experts' forecast, China's demand for drugs will rise by 12% annually to reach RMB 218 billion or US$ 26.37 billion by 2005. (Source: Asia Market Intelligence: Business Consulting Division) 68 China Pharmaceutical Enterprises on the Stock MarketThe State Drug Administration reported that 68 of the 6,700 pharmaceutical enterprises in China have been listed on the stock market. Of the 68 companies, there are 20 chemical drug producers, 27 traditional drug producing and distributing enterprises, 16 biomedical enterprises and 5 medical apparatuses makers. According to the State Economic and Trade Commission, there are now a total of 1, 800 foreign invested pharmaceutical enterprises established in China. These firms involved contractual investments totaling US $5.57 billion including US $2.75 billion of foreign funds. (Source: Asia Market Intelligence: Business Consulting Division)
List of China GMP Facilities (Continued)
Lehman Lee & XuChina Lawyers, Notaries, Patent, Copyright and Trademark Agents
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