Pharma China-201302

IBPC Becomes WHO Collaborative Center for Biologics in China Upcoming Events Shanghai Jails Hospital Employees for Taking Kickbacks Recent Official and Executive Moves New Report: Chinese Pharma Market to Expand 12% Annually before 2020 Chinese B2C Online Drug Sales Skyrocketed in 2012 New Study: Stem Cell Therapy Market in APAC to Grow 10% Annually by 2018 MOH Issues Revision to the "Rules for Drug Administrative Penalty Procedures" SFDA Issues Six Technical Guidelines for Rx-OTC Switch SFDA Revises Package Insert of OTC Levonorgestrel Tablets China Raises Reward for Food and Drug Whistleblowers to CNY 300K Chongqing Reduces Prices of 103 Drug Products Pharma Industry Growth Slowed in 2012 with Guarded Outlook This Year Only 12.1% of the Doctors Are Satisfied With the Domestic Academic Meetings Government Publishes White Paper on Medical and Health Services in China MOH Encourages the Formation of Medical Service Consortiums Shanghai to Introduce Multiple Measures to Healthcare Reform Guangdong Releases Healthcare Reform Plan for the 12th FYP Period Guangdong to Reform Centralized Hospital Drug Purchase Tender System? Anhui to Consolidate Essential Drug System in 2013 Henan Province's NRCMS Expands Major Medical Coverage to 20 Diseases Beijing's Healthcare Expenditures Grew as Out-of-pocket Expenses Fell in 2011 China Initiates Its National Cancer Registry Are East Asians More at Risk for Type-2 Diabetes? EntreMed Files CTA with SFDA for Oncology Drug Candidate Zhifei Bio's Tuberculosis Vaccine Gains SFDA Approval for Phase III Trials China Opens Trademark Registration for Retail/Wholesale Services of Drugs USTR's 2012 Report on China's WTO Compliance Highlights Remaining Concerns in Pharma Sector Growth of Chinese Pharma Falls as Year-end Approaches Government Issues New Measures to Push 2010 GMP Implementation Independent Drug Stores Account for 65.6% of All Drug Retailers in China Credit Suisse: BMI Payment System Reform to Benefit High-quality Generics Local Company News Foreign Company News Service Provider News NDRC Launches Price Cut on Respiratory, Analgesic and Certain Specialty Drugs SFDA Reveals Plan for Drug Regulation Reform in 2013 SFDA Seeks Comments on New Policy for Drug Evaluation, Approval and Innovation New Edition of National Essential Drug List Not Ready for Release Yet What Does the Year of Black Water Snake Hold for China Healthcare? Annual review and outlook of China's pharma and healthcare sector by Chief Editor James Shen. Shanghai Pharma to Reiterate Acquisition Drive SPCL will resume its acquisition drive this year with focus on pharma cos, instead of previously on drug distributors. Kelun Pharma Acquires 12.3% Stake of Lijun International Sichuan Kelun will purchase a 12.3% stake of Lijun Intl Pharma with US$135M and eventually boost holding to 30%. Tianjin Kingyork and Innovata Launches JV for Asthma Drugs Tianjin Kingyork formed a joint venture with Innovata HK Ltd. to manufacture powder inhaler drugs for asthma. Eli Lilly to Pay US$29M to Settle SEC Foreign Bribery Case Eli Lilly agreed to pay US$29M to settle civil charges of improper payments to foreign officials to win business in Russia, Brazil, China and Poland. MSD's Cervical Cancer Completes Phase III Trials in China MSD's HPV vaccine Gardasil for cervical cancer is awaiting final SFDA production approval, which is expected in 2013. 17 23 18 15 78 Industry News News in Focus 2 0 1 3 F e b r u a r y I s s u e C O N T E N T S ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ In This Issue 18 Editorial 2 TM P20 P20 P2 P21 17 25 26 The Market 14 18 P23 17 19 27 27 Feature Articles 19 27 20 27 25 24 23 26 24 25 28 People in the News Other News 32 31 28 P23 15 Product and R&D News 28 30 30 29 29 General Health 36 30 Legal/IPR News 28 29 What Does the Year of Black Water Snake Hold for China Healthcare? Regulatory News 25 Publisher: James J. Shen Chief Editor: James J. Shen Associate Editors: Joanne Xiao-Hua Zhou, Jenny Wang Correspondents: Chaojuan Jia, Yumei Li Editorial Assistant: Jessica Shen Editorial Consultant: David Xue, Luke Treloar Advisory Board: 13 distinguished industry leaders US Head Office: 311 Sayre Drive, Princeton, NJ 08540, USA Tel: +1 609-919-0898 Fax: +1 702-995-3905 E-mail: info@pharmachinaonline.com Internet: www.pharmachinaonline.com China Editorial Office: B-17D, Oriental Kenzo Plaza, 48 Dongzhimenwai Dajie, Dongcheng District, Beijing 100027, China. Tel: +86 10 8447-6010 Fax: +86 10 84476110 China Sales Representative: David Xue, PharmaGuys Info Tel: +86 10 8530-0937 Fax: +86 10 5885-7333 ext 0260 Cell: 18601267831 e-mail: dxue@pharmaguys.com Subscriptions (2013): Subscription Rate for Journal Edition: US$1,800 for Print or PDF inclusive of S&H (additional print copy in the same envelop is US$1,080). Gold Package: US$2,950 (includes single subscriptions to both Pharma China Journal Edition and Web Edition, Weekly Alert, Breaking News Alert, Pharma China Archive and Online Databases). Request order forms from: WiCON International Group LLC 311 Sayre Drive, Princeton, NJ 08540, USA. Tel: +1 609-919-0898 Fax:+1 702-995-3905 E-mail: info@pharmachinaonline.com Conditions of Sale: © All rights reserved by WiCON International. No part of this publication may be reproduced, stored in a re- trieval system, or transmitted in any form or by any other means, electronic, mechanical, photocopying, record- ing or otherwise without the written consent of the Publisher. Any abstraction of data for republication and sale requires prior written permission from the Publisher and provided due acknowledgement is made to the source. Without prior written permission of the Publisher, Pharma China may not be circulated outside the staff employed at the mailing address to which it is s e n t b y t h e p u b l i s h e r . P l e a s e c o n t a c t info@pharmachinaonline.com for details of multiple sites or global licenses. While due care has been used in compiling this information, the publisher makes no claim that it is free of error or fit for any particular purpose, and does not accept liability to anyone for the consequence of any decision or action taken in reliance on any information contained herein. PUBLISHER’S INFORMATION James J. Shen 2 © WiCON International Group LLC | www.pharmachinaonline.com Editorial WiCON | Pharma China February 2013 Issue 78○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ What Does the Year of Black Water Snake Hold for China Healthcare? Annual review and outlook of China's pharma and healthcare sector As we approach the Chinese New Year of the Black Water Snake, which falls on February 10, please bear with my secret fondness of crystal-balling with an irregular blend of Chinese Zodiac and my own intuition of the Chinese healthcare trends. It is time to put conventional wisdom aside ... after-all, big-name economists and Wall Street analysts always do a poor job foretelling what's ahead, don't they? My pulsing of the future might be worth some attention, forgive my ballooned ego, but I did have a reasonably good record predicting China healthcare outlook in the past few years. My "prophecy" on the Year of Rabbit (2011) suggested that "the landmines and threats are expected to be all over the place in China healthcare throughout the supposedly mild Year of Rabbit". I also predicted the Year of the Water Dragon (2012), which is supposedly an auspicious symbol of good fortune with a more peaceful disposition from water, to be a year that promises much but "by no means an easy time to get along, not to mention growth or new fortunes". Furthermore, I stated that "the Chinese healthcare space is even more challenging in 2012 with the healthcare reform stalled and growing uncertainties, the wild government cost containment drive undercutting quality and supply, and the pharmaceutical industry in total disarray with disappearing profits." Indeed, the Chinese pharmaceutical industry growth slowed substantially last year with falling profitability as the sector embraced three rounds of steep drug price cuts. What does Year of the Black Water Snake hold for us? The Chinese zodiac describes the snake as analytical, graceful and having a penchant for the finer things in life. The element Water is characterized with mobility, dynamism, and changeability, while Black is the color of deep waters. The Black Water Snake is supposed to bring unexpected changes, instability, and changeability. While global economic fragility and political gridlock are likely to be in "deep waters" for some time, there are some key factors to consider. After a torrid year for the Shanghai Stock Exchange, which saw the Chinese market lose nearly 8% of its value and plumb levels last seen since early 2009, there are signs that the economic hard landing will not be forthcoming. China's economy ended 2012 on a strong note with two indices showing continued expansion of the manufacturing sector. The official purchasing managers' index held above the expansionary 50 level in November and December, with a brief dip below in August and September before moving higher. Those latest numbers follow a surge to a 19-month high of the HSBC purchasing managers' index which showed 51.5 in December from 50.5 a month earlier. China's foreign trade in 2012, which rose 6.2% year-on-year to US$3.867 trillion, saw the best performance among major global economies, even though it missed the 10% percent target set earlier in the year. Although China is still set for sub-8% GDP growth in 2012, its weakest in more than a decade, momentum picked up noticeably in the fourth quarter after the government increased its spending on infrastructure. Should the Chinese manufacturers continue to gain traction, we may see the positive effects of this recovery in the world's second-biggest economy on commodity prices, construction and housing. In addition, should China's GDP growth remain at about 7.5%, its emerging middle class will continue to gain momentum, urbanize and expand into an even stronger consumer force. Nevertheless, there are questions about whether the rebound would soon run out of steam. Inflation, subdued for nearly two years, has started to edge higher, which could prompt an eventual tightening of monetary policy. Worries are also mounting about a boom in lightly regulated non-bank financing. 3© WiCON International Group LLC | www.pharmachinaonline.com February 2013 Issue 78WiCON | Pharma China ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ As I began to write this editorial, words spread that China's economy probably grew 7.7% in 2012, exceeding the government target of 7.5%, according to a senior official of National Development and Reform Commission (NDRC). But China's annual consumer price inflation quickened to a seven-month high of 2.5% in December, limiting the room for further policy easing to support an ongoing economic recovery. In the China healthcare space, the divine 7.5% GDP growth may be the defining line for sustaining growth in 2013 at the same level last year or additional brakes on the already slowing performance. Without the desired GDP rise, the government will have little choice but pressing the pedal of cost containment harder to facilitate the ongoing reform of China's deeply-troubled healthcare system. Although many pin high hopes on the new Chinese leadership, which was installed at the 18th CPC Congress last November after a good deal of unsettling political infighting, for much-needed political and social-economic reform to revitalize and reunite the country, there are emerging signs indicating more emphasis of the new leadership on fighting corruption and inequality than further political/economic liberalizations. While former left-wing leader Bo Xilai was taken down, the new leadership carefully kept the Chongqing model, which Bo and left-wing supporters created, intact and in fact may very well go down the same path themselves at some point, in which case the whole scenario of China healthcare business may be flipped entirely for foreign companies. Even without any major ideological changes, there will be widening gaps between near term goals of MNC headquarters and market realities faced by executives in the field, despite continuously surging Chinese healthcare demands and sustained business confidence for long term prospects of the sector. Well, enough about Chinese Zodiac and my self-acclaimed fortune-telling, let's move onto my regular annual review and outlook of the Chinese healthcare/pharmaceutical sector. Slowing pharmaceutical industry growth last year Although official or third-party data accounting for full 12-month performance of the Chinese pharmaceutical industry and market in 2012 has yet to become available, we have gathered sufficient data covering at least the first 10 months of last year plus reputable projections which should be sufficient to serve as the basis for a reliable full year view. Overall pharma industry and subsector performance The Chinese pharmaceutical industry output value and revenue growth slowed to 20.7% and 19.48% in the first ten months of 2012, according to official data from the Southern Medicine Economic Institute (SMEI) under the SFDA. Although the industry output value and revenues in the period reached a new high of CNY 1,459 billion and CNY 1,417.8 billion respectively, the growth speed was off 8.15 and 10.39 percentage points compared with the corresponding period in 2011. Output value growth of API, biological formulation and medical device subsectors in the first ten months were below overall pharma industry average, while pharmaceutical formulation, formulated TCM and crude drug subsectors performed above average at 24.3%, 21.5% and 27.6%. Similarly, the revenue growth rates of API, biological formulation and health material subsectors were below overall pharma industry average in the period, while pharmaceutical formulation, formulated TCM, crude drug and medical device subsectors performed above average at 22.29%, 21.79%, 24.72% and 21.04% respectively. As of 2011, the cost/revenue ratio of the Chinese pharmaceutical industry has been rising to above 70%. But the figure for the period fell slightly year on year by 0.47 percentage point to 71.03%. In the foreseeable future, however, this ratio is expected to continue on a benign rising trend, considering factors such as more stringent environment conservation measures and GMP renovation requirements. The sales and marketing expenditures of Chinese pharma sector also rose from only 16.01% in February to 24.10% in October last year. The sharp rise of such expenditures was related to multiple regulatory and cost containment measures introduced by the government this year, including investigation of drug ex- manufacturer prices and streamlined invoice practices which forced many domestic drug manufacturers to switch their sales model from currently external distributorship to more costly commission-based agency and internal direct sales approaches. Profitability of the Chinese pharmaceutical industry was at 17.42% in the first ten months of 2012, reaching a total of CNY 139.1 billion. In the period, the profit growth rates of API, formulated TCM, crude drug and biological product subsectors dropped somewhat year on year, while pharmaceutical formulation, crude drug and medical device subsectors did better than the previous year at 21.21%, 25.20% and 25.60% respectively. SMEI expects the total Chinese pharma industry output value and revenue to have grown around 20% and 20.2% respectively for the entire year of 2012, a drop of 7.2 and 6.6 percentage points year on year, to CNY 1,884.8 billion and CNY 1,824.4 billion. It forecasts the total Chinese pharma industry net profits to have grown 17.5%, a rebound of 4.9 percentage points year on year, to CNY 185.2 billion for the same year. Given the present market environment, it is generally anticipated that pharmaceutical industry growth in the near future would no longer match the high rates seen in 2010 and 2011. Industry profit growth continued to fall behind output value and revenues, although the speed of its freefall slowed somewhat compared with 2011. In the interim, the pharmaceutical formulation, formulated TCM and crude drug subsectors are holding out well in terms of output value and revenues, while profit erosion is less acute in the pharmaceutical formulation and crude drug subsectors. Formulated TCMs, which did well in the previous two years, slowed in revenue & output value growth and saw fast profit erosion due to intensified competition before the government even starts to axe such prices. Top ten manufacturers of formulated TCMs control 25% of the entire market of such medicines in China, while the share of MNCs in this market is only 1%, according to IMS Health. On the front of pharmaceutical distribution sector, overall sales of seven category pharmaceutical related products were CNY 834.2 billion in the first three quarters of 2012, up 18% year on year, SMEI data shows. Growth slowed 5 percentage points compared with that in 2011. SMEI's 2012 observations are confirmed by other reputable sources. Business Monitor International's "China Pharmaceuticals & Healthcare Report Q4 2012" suggests that China will remain as one of the key emerging pharmaceutical markets as the country prepares itself for deeper medical reforms and the expansion of its National Essential Drug List. Key drivers of its growth include an increasingly ageing but affluent population and the transition towards a higher burden of non-communicable disease. The company projects the Chinese pharmaceutical 4 © WiCON International Group LLC | www.pharmachinaonline.com WiCON | Pharma China February 2013 Issue 78○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ market to have risen 20.5% in local currency and 21.7% in US dollar terms to CNY 521 billion (US$81.4 billion) in 2012 from CNY 432 billion (US$66.7 billion) in 2011. Hospital drug market On a positive note, IMS predicts the Chinese hospital market to have grown 25-27% to more than US$50 billion in 2012, rebounding from 17.0% in 2011. The second quarter of 2012 saw China's pharmaceutical market grow by 21.1% as measured by sales in hospitals of 100 beds or more via the IMS CHPA syndicated audit) with a sales value of CNY 405 billion (at hospital purchasing price). The growth slowed down compared with the rate of 24.1% in the first quarter; however, the first 2 quarters of 2012 still remained growth rates in the mid-20% range, which represents significantly higher growth rates than what occurred in Q1 and Q2 of 2011. On a 12 month MAT (Moving Annual Total) basis, the growth rate of 19.6% indicates a continuous increase as of Q3 2012, outpacing that of 18.3% in MAT Q2 2011. Retail pharmacy/OTC market It was a very eventful year for China's OTC market in 2012, according to Jowin's James Fan, Nicholas Hall's Network Partner, with several developments contributing to a slowdown in growth compared to 2011. For the first time in 10 years, the sales upturn was under 7%, according to Nicholas Hall's DB6 sales for 12 months to September 2012. Key contributors to this slowdown are the gelatin capsules scandal, stricter controls on OTCs containing pseudoephedrine and increased availability of zero- margin Rx and OTC generics in hospitals. There was no significant improvement in the regulatory environment during 2012 and, by November, 4,000 ANDAs were waiting to be assessed. OTC manufacturers have been in a "De-innovation Environment" since 2004. For the Chinese retail pharmacy market, growth dipped to only 9.98% in 2011 (CNY 203.8 million) but a rebound with above 10% growt