Former China FDA Chief addresses challenges of innovative drugs in China
Entry barriers in medical insurance and hospitals, reduced VC due to price caps, and inadequate basic research from lack of rewarding mechanisms, necessitate full-chain support for biopharmaceuticals.
Bi Jingquan is currently Executive Vice Chairman of the China Center for International Economic Exchanges (CCIEE), a state thinktank, and Vice Chairman of the Economic Affairs Committee of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC).
His career includes significant roles within the National Development and Reform Commission (NDRC) from 1994-2008. Subsequently, he served as the Vice Secretary-General of the State Council, China’s government cabinet, from 2008-2015.
Bi was especially acclaimed during his time as Party secretary and top official of the China Food and Drug Administration (国家食品药品监督管理总局, CFDA) and later the State Administration for Market Regulation (国家市场监督管理总局, SAMR), which evolved from the CFDA. His 2015-2018 tenure in these roles was marked by significant achievements: clearing drug review and approval backlogs, enhancing the quality of generic drugs, and expediting the introduction of new drugs — maladies that had persisted in the Chinese medical system for over two decades. His bold and effective policies also earned him the accolade "变革者毕井泉 Bi Jingquan the Reformer."
Today's newsletter is an excerpt from Bi's speech at the Zhongke Pharm S&T Forum in Beijing, on Dec. 16, 2023. The forum was co-hosted by the China Pharmaceutical Enterprises Association, General Office of the Chinese Peasants' and Workers' Democratic Party (CPWDP) Central Committee, and Zhongke Pharm R&T Productivity Promotion Center, Co. Ltd. The original Chinese transcript is available on the official website of CCIEE.
Another part of Bi's speech has been published in Pekingnology, our sister newsletter.
For background, Bi had told the forum that Beijing has high hopes for the biopharmaceutical industry.
The Central Economic Work Conference emphasized the need to drive industrial innovation through scientific and technological innovation, particularly by leveraging disruptive and cutting-edge technologies to foster new industries, models, and dynamics, thereby developing new qualitative productive forces. It is crucial to vigorously promote new types of industrialization and establish several strategic emerging industries such as biomanufacturing, commercial aerospace, and low-altitude economy, while opening new tracks for future industries like quantum and life sciences. Strengthening applied basic research and frontier research, and reinforcing the principal role of enterprises in scientific and technological innovation is essential. The development of venture capital and equity investment should be encouraged.
Special attention must be paid to the concept of "driving industrial innovation with scientific and technological innovation" and "using disruptive and cutting-edge technologies to spawn new industries, models, and dynamics." Biomedicine is the most likely field for disruptive innovation. We should also focus on "establishing biomanufacturing and several other strategic emerging industries" and "opening new tracks for future industries like quantum and life sciences." The Center has elevated the biopharmaceutical industry to an unprecedented level, placing high expectations on it.
IV. Full-chain support should be provided for biopharmaceutical innovation
On August 28, 2023, when presiding over a State Council executive meeting, Chinese Premier Li Qiang emphasized that the pharmaceutical industry and medical equipment industry are important foundations of healthcare, relating to people's health and high-quality development. Considering the characteristics of pharmaceutical R&D and innovation, such as high difficulty, long cycles, and high investment, full-chain support should be given.
The competition in the biopharmaceutical sector is inherently global and significantly focused on development environments. Establishing a globally competitive market environment for biopharmaceutical development is strategically crucial. When such a favorable environment exists, it naturally attracts investment and research, driving innovation and progress in the field.
China's 2023 Central Economic Work Conference emphasized that "measures should be taken to strengthen the consistency of macroeconomic policy orientation, beef up the coordination...to ensure that the policies form synergy."
In line with the central government's requirements, it is advisable to make concerted efforts in the following aspects to support biopharmaceutical innovation and the advancement of medical technology.
First, increase investment in basic research in life sciences
The 2023 Central Economic Work Conference emphasized the need to "promote industrial innovation through sci-tech innovation", and to "strengthen applied basic research and frontier research, and enhance the main position of enterprises in scientific and technological innovation." [the latter phrase, not translated in the official readout, is sourced from the newsletter Ginger River Review.]
It is essential to strengthen basic research to enhance the capability of original innovation. In recent years, China's investment in basic research has grown rapidly, with an annual growth rate of 15%, but the spending on basic research is still relatively low. In 2019, the spending on China's basic research exceeded 6% of total R&D spending for the first time. The proportion reached 6.3% in 2022 but still has not met the 8% target set in the 14th Five-Year Plan.
Internationally, in countries like France, Italy, and Singapore, the spending on basic research accounts for over 20% of total R&D spending, and the figure surpasses 15% in the United States and the United Kingdom. The budget for the National Institutes of Health (NIH) in the United States in 2023 reached 48.6 billion USD, accounting for over half of the federal government's budget for basic and applied research.
Therefore, both in terms of the intensity of basic research investment and the absolute amount invested in life sciences research, there is a significant gap between China and developed countries. To strengthen the original innovation of drugs and promote the high-quality development of biopharmaceuticals, it is imperative to increase investment in basic research in life sciences.
Second, promote the commercialization of scientific and technological achievements to stimulate scientists' passion for innovation
To address the difficulty of commercializing government-funded scientific research results, the United States enacted the Bayh-Dole Act in 1980, which relinquished the federal government's ownership of government-funded research results to the researchers' institutions, ultimately forming a mechanism where the profits from the commercial exploitation of research results are divided equally among researchers, research teams, and institutions. This significantly increased the rate of the market application of scientific and technological achievements and laid an important foundation for scientific progress in the U.S.
Since the 18th National Congress of the Communist Party of China (CPC), China has made great progress in motivating scientists to invent and innovate. In November 2013, the General Office of the State Council issued the Opinions on Deepening Institutional Reform and Enhance Innovation in the Seed Industry, which allows researchers to participate in the distribution of profits from the market application of government-funded research results. In August 2015, the National People's Congress amended the Law on Promoting the Transformation of Scientific and Technological Achievements, stipulating that no less than 50% of the net income from the market application of technological results should be rewarded to researchers. The 2021 amendment of the Law on Progress of Science and Technology reaffirmed these provisions.
Technological innovation fundamentally hinges on the individual efforts of scientists. A considerable number of China's scientific personnel work in state-owned research institutes, universities, and medical institutions. Stimulating these researchers' enthusiasm for invention and creation is of great significance for implementing the innovation-driven development strategy and promoting high-quality development.
An important means to stimulate scientists' passion for innovation is to distribute a portion of the profits from inventions to individuals. It is unquestionable that the inventions and creations of scientists significantly contribute to the growth of the state-owned economy. All departments and regional governments should, in accordance with the provisions of the Law on Promoting the Transformation of Scientific and Technological Achievements and the Law on Progress of Science and Technology, revise the relevant regulations and rules that contradict the rewarding of scientists, and implement the sharing of profits from the commercialization of inventions by researchers in every scientific project.
The market application of innovative products is subject to both success and failure. While success is indeed a cause for celebration, it is equally important to approach failure with equanimity. It is a misconception to equate success solely with the advancement of the state-owned economy and to view failure as a loss of state-owned assets. Innovation should not be discouraged due to the possibility of failure.
The capital market's support for innovation should adhere to the same principle. It is advisable to continue to leverage the financing capabilities of the capital market, fostering and expanding venture capital and equity investments, thus injecting strong momentum into the development of biopharmaceuticals. Scientists, entrepreneurs, and investors naturally aspire for their products to succeed; however, scientific development is not solely governed by human will. It's crucial for investors in biopharmaceutical R&D, including those in private funds and secondary markets, to have a clear understanding of this reality.
Third, improve the drug evaluation and approval system, and encourage the R&D of original drugs
To develop the biopharmaceutical industry as a strategic emerging industry, we must strive to create a favorable environment for biopharmaceutical R&D. To measure against international standards, promote institutional opening up in line with the requirements of regulatory management standards, and foster an international, law-based, and market-oriented business environment, there is still much work to be done. This includes:
Reducing the timeframe for clinical trial applications from the current 60 working days to 30 natural days. This would align with the practice in the United States, a standard that has also been recently adopted by the United Kingdom. If Americans and the British can achieve this, we should be able to do it as well.
Improving the efficiency of ethical reviews. Ethical reviews should be conducted as soon as the results are submitted. In multicenter clinical trials, after the ethics review is approved by the lead unit, other hospitals should primarily focus on implementing the requirements of Good Clinical Practice (GCP), without the need for repeated reviews.
Further enhancing the transparency and efficiency of genetic material review and reducing waiting time for medical institutions.
The primary principle governing the market entry of drugs should be their ability to bring benefits to patients. Clinical trials for drugs that have widely-used counterparts in clinical settings should incorporate these existing drugs as controls in their experiments. Non-inferiority clinical trials should be strictly controlled to prevent redundant construction and excessive competition.
Suggestions proposed by the medical industry, such as allowing segmented production of biologics, abolishing mandatory inspections, and permitting the marketing and sale of process validation batches, are common international practices in line with China's institutional opening up. These should be studied and improved.
Disclosing to public drug evaluation and approval conclusions as well as safety and efficacy data to enhance transparency and authority. Publishing information about an approved innovative drug not only helps advertise the company,but also symbolizes the authority of the regulatory department.
Fully leveraging the role of expert advisory committees. It is advisable to openly deliberate on major decisions closely related to the public to build social consensus and distribute decision-making pressure.
Continuing to increase the number of reviewers, improving their remuneration, and effectively implementing the requirements of the State Council to "make it possible to recruit and retain reviewers." The number of reviewers should be consistent with the volume of applications.
Fourth, explore methods for reforming pricing mechanisms for innovative drugs
To encourage the development of an industry, it is essential to enhance the confidence of market entities and stabilize market expectations.
Developing new drugs is difficult, time-consuming, costly, and has a high failure rate. It involves high-risk investments and high-level innovation. A few days ago, an entrepreneur in Guangzhou mentioned at a symposium that conducting a phase III clinical trial in the United States requires an investment of 1.7 billion RMB (238 million USD) for rheumatoid drugs, 3.5 billion RMB (490 million USD) for renal drugs, and 2 billion RMB (280 million USD) for drugs that dissolve gout stones. The cost of clinical trials in China is roughly 50% of that in the United States. Out of ten drugs that enter phase I clinical trials, only one can enter the market. High returns should be allowed for such high-risk investments. Only then can scientists be motivated to engage in original innovation and investors be attracted to support the innovation in biopharmaceuticals.
Encouraging the development of the biopharmaceutical industry requires the implementation of patent and data protection systems. The first patent law, enacted in England in 1624, was titled "The Statute of Monopolies." When the United States introduced the Patent Act in 1790, President Lincoln said, "Patents add the fuel of interest to the fire of genius." The patent system is a reward for inventors, granting patent holders a market monopoly for a certain period. This monopoly includes the freedom to choose sales markets, determine production quantities, and set product prices. Without these rights, patent protection loses its meaning of market monopoly and makes sustainable innovation difficult.
Data protection is a commitment made when China joined the World Trade Organization (WTO). It not only protects the rights of technological enterprises but also binds regulatory bodies to confidentiality obligations. Before Regulations for Implementation of the Drug Administration Law are promulgated, the regulatory authorities should formulate interim regulations in accordance with the WTO commitments, which is an urgent need to encourage innovation.
Entrusting the pricing right to enterprises and the market is an inevitable requirement of the market monopoly of patented products and is essential for stabilizing market expectations and boosting investors' confidence. The recent listing of innovative drugs from HUTCHMED and Junshi Biosciences in the United States has attracted significant market attention. The prices in the U.S. market are 30 and 20 times higher than in China, respectively. High pricing is the best advertisement. Continuing this trend will attract more innovative drugs to the U.S. market. If Chinese companies prioritize launching new drugs in the U.S., they will be encouraged to conduct clinical trials in the U.S. and vice versa.
The pricing mechanism for innovative drugs is a matter of life and death for China's biopharmaceutical industry. Companies and investors would make a risk-return assessment of their projects and have an expected price. Whether this expected price can be realized should be determined by the market. If it is decided by factors outside the market, the market becomes unpredictable, which will bring risk. Capital will then flee from high-risk markets to those with lower risk. Since China's biopharmaceutical industry is mostly driven and supported by capital investments, the withdrawal of capital from biopharmaceutical innovation will lead to financing difficulties for innovative drug companies and the decline of the innovative drug industry. Without innovative drugs in the Chinese market, generic drug companies will find it hard to obtain reference drugs, making it difficult for the generic drug industry to survive, let alone achieve high-quality development.
Fifth, leverage the role of medical insurance in covering major illnesses
The core function of the medical insurance system is to equitably distribute medical expenses among the insured, serving as a mutual aid mechanism for healthcare costs and preventing patients from falling into or returning to poverty due to illness. The first medical insurance system in human society, established by Bismarck in Prussia in 1883, was based on the logic that everyone gets sick inevitably, but what illness one gets is a matter of chance. To address the randomness within this inevitability, everyone pays a fee to support those with major illnesses, preventing them from falling into poverty due to illness. Hence, Bismarck's medical insurance was designed for blue-collar workers, with the wealthy having the option not to participate.
China needs to undertake a detailed study on how to reform its medical insurance system. This reform should aim to resolve the current disparities in treatment across different groups and regions and address the contradiction between insufficient coverage for major and serious diseases and the existence of substantial fund surpluses.
The basic principle of medical insurance is immediate payment and balance within a certain period. Surpluses mirror that premiums should be reduced, and insufficient funds mean premiums should be increased. It is necessary to study how to utilize the payment function of medical insurance, focusing on preventing patients from falling into poverty due to illness and balancing properly between encouraging innovation in biopharmaceuticals and the burden of medical expenses on society.
Sixth, solve the difficulty of getting innovative drugs into hospitals
Compared with currently used clinical drugs, newly approved drugs can bring more benefits to patients.
It is advisable to lift the current restrictions imposed by hospitals on drug quantities, the "dual regulations for one drug" policy [which limits each generic name drug to no more than two varieties, including injectable and oral dosage forms], and the cap on the proportion of drug revenues in a hospital's total revenues.
It is advisable to encourage more or even all three-tier hospitals to proactively purchase innovative drugs and to make it more convenient for innovative drugs to be integrated into hospital settings. The practice of zero-profit drug sales in hospitals violates economic laws. To motivate hospitals to procure and sell innovative drugs, it is advisable to allow a reasonable markup on innovative drugs to compensate for hospital drug costs.
It is necessary to reform the mechanism that compensates medical costs with drug-selling profits, research on rationalizing the prices of medical services while controlling the social burden of medical expenses, and prohibit the practice of using the income difference from drug and consumable costs, and the surplus income from examinations and tests, to pay doctors' performance wages. This is to ensure that drugs return to their use value in treating diseases and saving lives. Currently, there is too much waste in the medical field, and the issue of excessive medical treatment is prominent. By effectively addressing these issues of excessive medical treatment, it is entirely possible to rationalize the prices of medical services without increasing the overall social burden of medical and pharmaceutical expenses.
As long as medical service prices are reasonable, doctors will be able to earn a reasonable income and will be encouraged to start private clinics outside of hospitals. It is essential to earnestly implement the requirement from the report to the 20th National Congress of the CPC to "build up the ranks of medical and healthcare personnel with an emphasis on rural areas and urban communities", and create conditions to encourage doctors to practice in these regions.
The issues and suggestions we are confronting now are the ones that have emerged alongside the development of the biopharmaceutical industry. They are problems of development and challenges brought about by the high-quality development of the industry and the participation in international competition. They represent the challenges we face in the international competition for biopharmaceutical innovation.
The spirit of the Central Economic Work Conference can inspire us to reconsider the position and significance of biopharmaceuticals, seek unified understanding and find solutions to these issues. As we continue to disseminate, study, and implement the spirit of the Central Economic Work Conference, we will gain new insights and see new measures emerge to encourage innovation. We should be confident in this regard.
In summary, we must follow the guidelines of the Central Economic Work Conference. We should fully recognize the significance of biopharmaceuticals as a strategic emerging industry, of encouraging innovation to drive industry development, and of consistency in macroeconomic policy orientation. Meanwhile, it is necessary to provide full support for the innovative development of biopharmaceuticals at all stages, including R&D, access, production, use, and payment. We must strive to create an institutional environment that encourages innovation in biopharmaceuticals, making more contributions to people's health, high-quality development, and the development of Chinese modernization!
Check out another part of Bi Jingquan's speech on Pekingnology and more from The East is Read: