China vs. India: the fight for pharma supremacy

As the world races to devel­op and dis­trib­ute a vac­cine to com­bat coro­n­avirus, there is a par­al­lel con­test gath­er­ing momen­tum between India and China’s phar­ma­ceu­ti­cal mar­kets. The phar­ma indus­tries in both coun­tries are per­ceived to be com­pet­ing for a posi­tion at the head of the glob­al mar­ket. While India retains its posi­tion as a world leader in gener­ic med­i­cine pro­duc­tion, Chi­na has increased its invest­ment in research and devel­op­ment, sig­nalling an inter­est in over­tak­ing com­peti­tors.

India, recog­nised as a phar­ma­ceu­ti­cal pow­er­house, is fac­ing a threat. In Made in Chi­na 2025, China’s indus­tri­al pol­i­cy aim­ing to make the coun­try dom­i­nant in glob­al high-tech man­u­fac­tur­ing, bio­med­i­cine is a key strate­gic goal. A laser-sharp focus on expand­ing their bur­geon­ing phar­ma mar­ket is pro­vid­ing Chi­na with a dis­tinct edge in drug devel­op­ment com­pared with India.

China’s growth driver: emphasising innovation

In 2016, China’s phar­ma­ceu­ti­cal mar­ket was worth $123 bil­lion, but this fig­ure is pro­ject­ed to surge to $573 bil­lion by 2022. McK­in­sey & Com­pa­ny hails China’s bio­phar­ma indus­try as only sec­ond behind the Unit­ed States in glob­al num­bers. Its immi­nent trans­for­ma­tion will arise from the invest­ment and sup­port being put into inno­va­tion. 

“Chi­na is invest­ing heav­i­ly in R&D and they know this is the first step to achieve­ment in this indus­try,” says Dr Kamal Rashid, found­ing direc­tor of the US Cen­ter for Bio­phar­ma­ceu­ti­cal Edu­ca­tion and Train­ing. “Invest­ment in the work­force is also essen­tial. To pro­duce a good prod­uct that will receive approval, you need both man­pow­er and facil­i­ties. There is a need for a good work­force to make inno­va­tion a real­i­ty. This is some­thing Chi­na is get­ting into more aggres­sive­ly.”

The Chi­nese gov­ern­ment has cre­at­ed a sup­port sys­tem to incu­bate new firms, allow­ing them to leap from old tech­nolo­gies into cre­at­ing bio­log­ics. Key play­ers in their domes­tic mar­ket include Sinopharm Group and Shang­hai Phar­ma­ceu­ti­cals, but multi­na­tion­als such as AstraZeneca, Pfiz­er, and Novar­tis make up a sub­stan­tial com­po­nent of the ecosys­tem. In Chi­na, the lat­ter con­tribute to glob­al phar­ma rev­enues at an aver­age of 8 per cent.

Indian pharma continues focus on generics

A dearth in the cre­ation of bio­log­ics sets India a few steps behind China’s vision for their phar­ma mar­ket. Yet India con­tin­ues to be hailed as the largest provider of gener­ics glob­al­ly. “India is referred to as the phar­ma­cy of the world and with good rea­son,” says Nithya Bal­a­sub­ra­man­ian, direc­tor at invest­ment man­age­ment firm Bern­stein.

At present, gener­ic drugs man­u­fac­tured in India account for 20 per cent of the glob­al con­sump­tion of gener­ics, in addi­tion to 40 per cent of pre­scrip­tions dis­pensed in the Unit­ed States, which is safe­ly posi­tioned as the largest phar­ma mar­ket. In 2019, Indi­an phar­ma was worth $38.8 bil­lion, con­tribut­ing sig­nif­i­cant­ly to the country’s eco­nom­ic growth.

“While the US mar­ket has been in the driver’s seat dic­tat­ing val­u­a­tions, the Indi­an domes­tic mar­ket remains the ever-reli­able ver­ti­cal for most Indi­an gener­ics and is slow­ly gain­ing promi­nence,” says Bal­a­sub­ra­man­ian.

While their growth will con­tin­ue in the sup­ply of gener­ics, inno­va­tion has been giv­en far less atten­tion in India com­pared to Chi­na. Bal­a­sub­ra­man­ian notes that most recent prod­uct launch­es in India have been “incre­men­tal­ly inno­v­a­tive”. India’s mar­ket growth will stem, instead, from the “com­mer­cial mus­cle of Indi­an gener­ics”, she says.

Accord­ing to the Indi­an Phar­ma­ceu­ti­cal Alliance (IPA), there are sev­er­al chal­lenges to the expo­nen­tial growth Indi­an phar­ma could achieve. For one, an envi­ron­ment con­ducive to long-term invest­ment deci­sions in the phar­ma­ceu­ti­cal indus­try has yet to be estab­lished. Oth­er key chal­lenges include lack of inno­va­tion, less access to skilled work­ers and stricter guide­lines in qual­i­ty com­pli­ance in inter­na­tion­al mar­kets. The IPA reports there are about 29 skilled work­ers avail­able for every 10,000 peo­ple in India, in com­par­i­son to Chi­na, where there would be about 41.

A notice­able depen­dence in India on exter­nal mar­kets, includ­ing Chi­na, for inter­me­di­ates and active phar­ma­ceu­ti­cal ingre­di­ents is an addi­tion­al fac­tor. How­ev­er, ana­lysts believe India will per­se­vere and show growth in this sec­tor.

“We remain opti­mistic about the growth prospects for the indus­try in the next four to five years and believe they will con­tin­ue to be the largest con­trib­u­tor to prof­itabil­i­ty for Indi­an gener­ic man­u­fac­tur­ers,” says Bal­a­sub­ra­man­ian.

All eyes remain on the Chi­nese as they climb the glob­al mar­ket rank­ings, fore­shad­ow­ing a pos­si­ble change of lead­er­ship in new tech­nol­o­gy and life sci­ence.

Pharmaceutical power on a global scale

This clash of glob­al phar­ma­ceu­ti­cal titans is ongo­ing. How­ev­er, it begs the ques­tion of whether this race will result in the poten­tial cut­ting of cor­ners in man­u­fac­tur­ing and approval process­es, ulti­mate­ly low­er­ing stan­dards?

“We can’t play with human health, so cut­ting cor­ners would be the last thing to do,” says Rashid. “In the Unit­ed States, the fed­er­al gov­ern­ment heav­i­ly reg­u­lates inno­v­a­tive drugs. In oth­er coun­tries, reg­u­la­tion may not be as strin­gent and this will need to be dis­cussed.”

The impact of the next phar­ma­ceu­ti­cal pow­er­house may extend far beyond health­care mar­kets, spilling over into glob­al influ­ence and soft polit­i­cal pow­er. China’s phar­ma­ceu­ti­cal com­pa­nies appear to be play­ing a very dif­fer­ent game to India’s and this strat­e­gy is like­ly to clinch the posi­tion of phar­ma­ceu­ti­cal suprema­cy.