Pharmaceuticals & drugs market and regulations in China

In 2023, the market for drugs and pharmaceutical products in China was worth $160 billion. Its annual growth of 8.5% is fuelled by several factors:

• Ageing population: the country is experiencing a rapid ageing of its population. By 2023, around 18% of the population will be over 60.
  
  
• Urbanization and rising incomes are increasing demand for quality healthcare.
  
  
• Healthcare reforms: the Chinese government has launched several series of reforms to improve access to healthcare and reduce medical costs. This is boosting demand for drugs and related pharmaceutical products.

The Chinese pharmaceutical market is divided into 3 key segments:

Innovative medicines: by 2023, this segment will account for approximately 32 billion USD, growing at 15% per annum. Innovative medicines include biopharmaceuticals, gene and cell therapies, and treatments for rare diseases. Also known as next-generation drugs or advanced therapies, they are treatments developed from the latest research in biotechnology, genetics, immunology and other advanced medical fields. They include cell-based therapies, RNA-based therapies, targeted therapies, Advanced Therapy Medicines (ATMPs), etc.

• Generic drugs: these make up 70% of the market, naturally due to the demand for affordable alternatives to brand-name drugs. Copies of brand-name drugs whose patents have expired, they contain the same active ingredient. In other words, generics are equivalent in terms of dosage, safety, efficacy, quality and use.
  
  
• Holistic Chinese health products: this market is estimated to be worth 50 billion USD. Traditional Chinese medicines continue to play a crucial role in Chinese health and well-being, and are increasingly recognized worldwide for their therapeutic value. This market continues to grow steadily, thanks to cultural acceptance as well as government support. The Chinese pharmacopoeia is rich in herbs, minerals (including pearls) and animal substances. Chinese medicine uses these substances to treat a variety of illnesses according to holistic and energetic principles.

		Below are the expected top 10 categories of pharmaceuticals exported to China in 2024, with import values and top countries of origin.
Medicines		China import value	The 3 first countries of origin
1	Anti-cancer Drugs	USD 12.8 billion	Germany (4.3B), USA (4.2B), Switzerland (4.3B)
2	Vaccines	7.5 billion	USA (3B), Belgium (2.5B), UK (2B)
3	Cardiovascular Drugs	6.2 billion	Switzerland (3.2B), France (2B), Germany (1B)
4	Antibiotics	4.5 billion	Japan (2.B), India (1.8B), USA (700M)
5	Insulins	3.8 billion	Denmark (2.2B), USA (1B), Germany (600M)
6	Biological Products	3.4 billion	France (1.8B), USA (1.2B), South Korea (400M)
7	Nervous System Drugs	2,. billion	UK (1.3B), Switzerland (900M), Germany (700M)
8	Vitamins	2,. billion	India (1.1B), USA (700M), Germany (500M)
9	Ophthalmic Products	1.8 billion	Italy (800M), USA (600M), Germany (400M)
10	Oral Health Products	1.6 billion	Spain (700M), USA (600M), France (300M)
Source: Statistics compiled by C.I. Process using figures provided by NMPA, MOFCOM and Chinese Customs.

		The National Medical Products Administration (NMPA) is China's regulatory body for pharmaceutical products.
The NMPA oversees clinical research, new drug approvals, and quality and safety controls for the Chinese market. . Under the supervision of the SAMR (Market Supervision and Control Administration), the NMPA is made up of 11 departments and 31 regional branches responsible for the affairs of each province.   Here is the classification according to the Chinese authorities' frame of reference:

 

5. Drug registration procedures (NMPA)

Approval to market pharmaceutical products in China involves a number of key stages:

 

Registration : a complete file submitted to the NMPA. It includes data on composition, manufacturing, clinical trials, and results of bioequivalence studies (for generics). The dossier must demonstrate that the product is safe, effective and of high quality. Clinical trials: new drugs must undergo trials in China carried out by local laboratories and institutions. Trials are divided into 3 phases: Phase I: evaluation of safety and tolerance in healthy volunteers. Phase II: evaluation of efficacy and safety in patien Phase III: confirmation of efficacy and safety in a large number of patients. Trials must be conducted in accordance with clinical practices laid down by the NMPA.

Manufacturing inspection: production sites must be inspected and approved by the NMPA to ensure compliance with Good Manufacturing Practices (GMP). These inspections include assessments of the quality of raw materials (ingredients), the manufacturing process, and quality control.

Review and approval: once clinical trials and production inspections have been completed, the NMPA reviews the entire dossier. If the requirements are met, the product receives a registration certificate which authorizes its marketing in China. The review process takes from 6 months to 2 years, depending on the complexity of the product and the quality of the dossier submitted.

In case of non-compliance, the NMPA imposes progressive sanctions. These may include warnings, confiscation of stock, fines and penalties. In the most serious cases, the NMPA can order suspension of activities and revocation of licenses.. The impact on the company's administrative reputation (social credit) must also be taken into account. Competitors will not fail to exploit information that is now public, by conducting well-orchestrated ranting campaigns.

 

6. Compliance challenges

 

Regulatory complexity: China's reputedly complex regulations are constantly evolving. Companies need to keep abreast of the latest updates and requirements of the NMPA to avoid delays in product approval. This recommendation also applies to companies trading in cosmetics products and medical devices. The NMPA, which is the regulatory authority for all these products, regularly publishes guides and guidelines to help local companies navigate the regulatory process.

Local clinical trials are most often have to be conducted in China, which can entail high costs and additional delays. Companies must collaborate with local institutions and comply with Chinese standards. The NMPA also requires clinical data to be representative of the Chinese population, which may necessitate specific adaptations to trial protocols.

Manufacturing inspections by the NMPA are rigorous. Companies must ensure that their facilities comply with Chinese best practices. These may differ from international standards. Inspections may include unannounced visits and detailed audits of manufacturing processes and quality management systems.

Protection of intellectual property: this remains a challenge in China, even if substantial improvements are being observed. At a press conference in January 2024, Wang Bin, spokesman for the Chinese Ministry of Foreign Affairs, said: “China continues to expand its openness in intellectual property protection, promoting a first-class business environment focused on the market, respect for the rule of law and internationalization” (source). International companies must nevertheless take steps to protect their patents and trade secrets against counterfeiting and copying. This may include registering patents in China, or using strict confidentiality clauses in contracts. To this should be added active market surveillance to detect intellectual property violations.

 

 

7. Opportunities for international exporters

 

Despite the challenges, the Chinese market offers great opportunities for international exporters in the pharmaceutical sector. Options for entering this market include

The 100% foreign-owned subsidiary: the creation of a 100% Chinese subsidiary (ex-WFOE) gives companies full control over their operations in China. This includes the production, distribution and marketing of pharmaceutical products. A WOFE also offers greater flexibility to comply with local regulations and protect intellectual property. Companies can thus guarantee consistent product quality and efficient management of their business activities.

A joint venture with a local partner: a JV with a Chinese partner can facilitate market entry by benefiting from local expertise and his established distribution network, through his own sales and retail branches for example. The local partner can also help navigate the complex regulatory landscape and speed up the approval process. With a trusted partner, the joint venture makes it possible to share the risks and costs associated with entering the Chinese market.

International distribution contracts: a contract with one or more carefully selected Chinese distributors enables exporters to penetrate the Chinese market without needing to establish a physical presence in China. A local distribution agent can manage the China logistics, promotion and sales, while ensuring compliance with Chinese regulations. This approach can be advantageous for an SME wishing to test the market before investing further. Or for those who wish to limit their ambitions to exporting only.

 

OPPORTUNITIES IN A NUTSHELL The Chinese pharmaceuticals market presents real opportunities for exporters. However, success in China requires a thorough understanding of local regulations, a rigorous compliance strategy, and a flexible approach to adapting to the particularities of the market. The success stories of Roche, Sanofi and AstraZeneca illustrate the strategies that lead to successful penetration with manufacturing subsidiaries in China. Whether through a direct subsidiary, a JV with a partner or a distributor, innovative biotech companies can also benefit from China's potential.

 

• Handling approval files for hazardous products and chemicals, drugs and medical apparatus.
  
  
• Regulatory monitoring service, market & competition reports.
  
  
• Search and pre-selection of China import agents and distributors.
  
  
• FDI: feasibility reports, comparison of investment opportunities and advantages in industrial parks.
  
  
• Support and ongoing follow-up in case of disputes or denunciations with the Chinese administrations.
  
  
• Incorporation of foreign-owned enterprises. Licenses, certificates and permits required to operate legally or expand to more activities.
  
  
• Consulting service in warehousing solutions. Storage and distribution of sentitive products.
  
  
• Search for manufacturing facilities to lease or buy, suitable for regulated products.
  

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