China Adds Hurdles for International Pharma Firms

Investors in the pharmaceutical sector might want to have another look at some of their investments in the wake of a change to Chinese laws, particularly those betting heavily on new Chinese business.

International drug companies operating in China have already felt the sting of tighter regulation enforcement after aggressive investigations pursued allegations of bribery and corruption that resulted in substantial penalties.

Now, however, they are facing changes in the regulations themselves. An extra layer has been added to the drug approval process, specifically for international companies, and that means delays of perhaps as long as two years for approvals to come through for drugs to be marketed in China. That’s something that could take a toll on their bottom lines.

China has required that clinical trials take place in China, on Chinese patients, before it would grant approval for a drug to go to market within the country. So that the approval process would be streamlined, international pharmaceutical companies have long included China in their international drug trials, using multicenter regional trials that can include other Asian countries, such as Korea or Japan. But a local trial that is conducted as part of a multicenter regional trial is not regarded in the same light by China’s Food and Drug Administration (CFDA) as a local trial conducted by a China-based company.

In the past, companies had to obtain permission to conduct those international multicenter trials from the CFDA. Then, once trials were completed, the trial data had to be submitted for review, including patient data from all the countries and regions in which trials were performed, not just data for China. After acceptance, permission to sell the drugs in China would be granted.

Now, however, that final step has been split into two. International companies are no longer granted approval once the data are approved. Instead, they must now apply separately for “clinical trial approval” because of the international trial, even though it contains a Chinese component (rather than a local trial that is conducted exclusively within China, as it would be for a Chinese company), and then apply for permission to sell the drugs once the approval is granted.

Companies looking to test drugs in a regional trial have had to submit a waiver to be exempted from the “local trial” requirement, which in the past has been done at the same time as filing the application for approval of the new drug. Now, however, that waiver must be filed after the multicenter trials are completed, but before the company can apply for the new drug to be approved.

Bayer AG has already acknowledged the cost of the delay, pointing out in reports that it had originally expected approval to sell a new drug, which it did not name, in October of 2013. However, with the new layer of approvals, it no longer knows when marketing approval may be granted and said that while the drug’s trip to market could be late in 2015, it could be delayed to as late as 2016.

That will not only affect the date when the drug finally becomes available in China, but also has repercussions for the patent lives of drugs that now must wait perhaps twice as long for approval on the Chinese market.