Thanks for the briefings summary and follow up explanations...

Thanks for the briefings summary and follow up explanations Reillyblue.

The comment regarding Credit Pharma, together with the comment in today’s newsletter about the TPM diclofenac gel deal, suggests to me that this may be the first of multiple deals in China.

I've provided below some notes from recent research on the large and rapidly evolving Chinese pharmaceutical market. I would like to emphasise a couple of points from these notes. The first is market growth. Globally, pharma is chasing growth markets (both geographic and product sector). With a current annual growth rate of 20%, pain therapies in China is a high growth market. (As is opioids in Japan, as this recent Bloomberg article demonstrates.) Secondly, drug reimbursement and affordability are important considerations for pharma. China has moved quickly in this area. Thirdly, low regulatory standards have doubtlessly been holding back China’s participation in the (legitimate) global pharmaceutical market. Hence, China’s admission into the ICH in June this year is significant, imo.

Pharma Market Size

• China has now overtaken Japan as the second largest pharma market in the world. The market is projected to grow from USD 115 billion in 2016 to USD 160 billion by 2021 and USD 237 billion by 2026, according to BMI Research.
• Annual spending on medicine per capita is ~ USD 120 (compared with ~USD 25 in India).
• Hospitals account for almost two in every three dollars spent on medicine in China.
• OTC drugs account for 17% of the pharmaceutical market (2016, IMS).

Insurance Coverage and Payment

• Over the decade between 2003 and 2013, the Chinese government expanded health insurance coverage from 30% to over 95% and aims to achieve universal coverage by 2020. (In comparison, less than 20% of the Indian population is covered by any form of health insurance). At the same time, medical insurance plans at the provincial level have been introduced to complement the basic insurance programs. This increase in health insurance coverage has had a dramatic impact on drug reimbursement and affordability in China.
• The Chinese government has a list of reimbursable medications (the NRDL) which it intermittently updates. The current list includes 1,300 western-style medicines. Inclusion on the NRDL means a drug is accessible via state insurance schemes. Drugs on the list can be reimbursed up to 80% depending on local implementation.
• Aside from public reimbursement, a large part of China’s population has become increasingly affluent and has demonstrated an ability and willingness to pay out-of-pocket.
• In addition to government health insurance and self-pay, there is also growing government support for the development of commercial private health insurance to provide support for China’s growing middle and upper classes. Favourable industry policies such as tax incentives to consumers have been issued.
• China currently has a middle class of ~150 million (compared with ~25 million in India). McKinsey research estimates that by 2022, more than 75% of China’s urban consumers will earn between USD 9,000 and USD 34,000 a year which ranges, in purchasing-power-parity terms, between the average income of Brazil and Italy.

Drug Development

• In recent years, the Chinese government has focused on promoting innovation in the pharmaceutical industry, especially in areas of high unmet medical need, through streamlining regulatory processes, improving drug quality standards and fostering a favourable environment for innovation.
• In 2015, China’s State Council announced its intention to encourage the transformation and upgrading of the Chinese pharmaceutical industry.
• As developing a drug in China is far cheaper than it is in America or Europe, there is strong incentive for Chinese firms to develop medicines for the global market.

China FDA (CFDA)

• On June 1 2017, China FDA (CFDA) was accepted as a new regulatory member of ICH. The ICH organization was created by drug regulatory agencies and industry associations from the US, Europe, and Japan, to facilitate collaboration, standardization and improvement of drug development practices throughout the world. Its aim is to increase patient access to safe, effective, and high quality pharmaceuticals, and to ensure that pharmaceuticals are developed and registered efficiently. As a new member of ICH, China will be required to implement a basic set of regulatory requirements for the manufacture of pharmaceuticals, for the conduct of clinical trials, and for stability testing of pharmaceutical products.

Pain Therapies, including Opioids

• The market for painkillers in China has recently been growing at 20% per year (more than twice the rate of the overall drug market) to reach USD 530 last year.
• Recent growth in use of opioids has been driven by a surge in cancer cases – from 2.1 million new cases in 2000 to 4.3 million in 2015.
• Mundipharma (associate company of Purdue Pharma) entered China in 2011. Half its worldwide sales in the developing world now come from China, and those sales are dominated by pain therapies. Mundipharma says that China is central to its global strategy.
• Mundipharma manufactures OxyContin pills in China, has 60% share of the Chinese cancer pain market and has sponsored clinical trials of opioids across the country.
• Drug addiction and abuse exist in China. There are nearly 3 million known (registered) drug abusers.

http://static.correofarmaceutico.co...outlook_for_global_medicines_through_2021.pdf

https://www.sec.gov/Archives/edgar/data/1704292/000119312517258641/d358845df1.htm

https://www.reuters.com/article/us-...ug-list-in-boost-for-big-pharma-idUSKBN1620D7

http://www.huffingtonpost.in/2016/06/03/these-numbers-show-that-i_n_10259404.html

https://www.mckinsey.com/industries/retail/our-insights/mapping-chinas-middle-class

https://www.economist.com/news/busi...mark-important-milestone-chinese-pharma-firms

https://blogs.fda.gov/fdavoice/inde...-harmonization-of-drug-development-standards/

http://www.latimes.com/projects/la-me-oxycontin-part3/

http://www.scmp.com/news/china/poli...es-boom-painkiller-centre-opioid-addiction-us

https://www.ft.com/content/4e482c4c-897e-11e7-bf50-e1c239b45787?mhq5j=e7