9 Characteristics of China’s Pharmaceutical Foreign Trade in 2017

1. Trade surplus significantly narrowed, and pharmaceutical foreign trade achieved balanced development. In 2017, the amount of import of pharmaceutical products was USD 55.877 billion in China, while the amount of export thereof was USD 60.799 billion, therefore, the trade surplus declined to USD 4.922 billion, down by 34.60%. The main reason for the rapid narrowing of the trade surplus was the rapid growth of the import of high-end medical devices, pharmaceutical equipment, Western medicine preparations, and biologics for consecutive years.

2. Supply-side reform achieved initial success, and API export overall showed a warming trend. In 2017, affected by objective factors such as tightening of environmental protection, shortage of upstream supplies, and price rise of raw materials, Chinese enterprises accelerated the structural reform of Western medicine API production lines, increased environmental protection control efforts, and shifted from "volume sale" to "quality guarantee". The API export showed the trend of volume decline and price increase in the first half of 2017, while the second half saw the revival of the export volume, with the amount of export significantly increasing, and the whole-year growth of 13.71%.

3. Processing trade rebounded, and preparation processing trade largely increased. In 2017, the amount of export of pharmaceutical product processing trade was USD 10.431 billion, growing by 6.11% year on year, wherein, the preparation processing trade rapidly grew by 48.80%.

4. New fields such as bio-pharmaceuticals and in vitro diagnostics were burgeoning. The production and sales scale of China’s bio-pharmaceutical industry has grown steadily, with the annual growth above 15%. China has become the country with the second largest number of biological drugs in development next only to the U.S. China’s in vitro diagnostic reagent market size is also increasingly expanded, and is expected to reach RMB 72.3 billion by 2019, with the compound annual growth rate reaching 18.7%.

5. Medical service trade showed exuberant growth momentum. For local Chinese enterprises, new formats such as CRO (Contract Research Organization), CMO (Contract Manufacture Organization), and CSO (Contract Sales Organization) have gradually risen with the continued extension and breakdown of the pharmaceutical industry chain, and become new forms for Chinese pharmaceutical enterprises to participate in international division of labor. TCM services are quickened the "going abroad" pace. According to data, China sends out about 2,000 TCM clinicians every year, accounting for 60% of all the assigned medical service personnel. There are more than 60 TCM service trade institutions operating TCM hospitals, TCM clinics, TCM healthcare institutions, and TCM research centers, etc. in more than 20 countries and regions, annually receiving 250,000 person-times.

6. Transformation of R&D achievements entered the harvest time. In 2017, Chinese enterprises obtained 34 Abbreviated New Drug Application (ANDA) approvals for preparation products (including 8 tentative approvals), being 1.7 times the number approved in the previous year. More and more Chinese enterprises have gone abroad to the U.S. generic drug market. The "licensing" has been the keyword in China’s pharmaceutical R&D field since 2017. Collaboration in 6 products of the four enterprises: BeiGene, Hengrui Medicine, Gloria Pharmaceuticals, and Nanjing Legend was conducted with overseas R&D giants and multinational investment banks in the form of licensing, with the total transaction amount exceeding USD 3.2 billion.

7. Pharmaceutical capital operation became a normal, and transaction amount surged to new highs again and again. At the beginning of 2017, SanPower Group announced the acquisition of the U.S. biopharmaceutical company Dendreon for USD 819 million, kicking off 2017 with such a big investment, followed by Fosun Pharmaceutical, Humanwell Healthcare, Xianju Pharma, 3SBio Inc., and Wego Group, etc. SanPower Group created the record of a Chinese enterprise acquiring the first overseas biological original drug, while Fosun Pharmaceutical has created the biggest overseas M&A case (USD 1.091 billion) so far of a local Chinese pharmaceutical enterprise.

8. Trade remedy cases against China occurred frequently, and intellectual property (IP) cases increased markedly. Trade frictions encountered by China’s pharmaceutical industry have shown a clear rising trend over the years. The pharmaceutical products exported from China encountered 15 trade friction investigations in 2017, including 5 anti-dumping investigations and 1 anti-circumvention investigation started by India, 4 Section 337 investigations involving IP infringement and 1 antitrust lawsuit started by the U.S., 2 anti-dumping investigations started by the EU, and 1 anti-dumping investigation started by Ukraine.

However, the Chinese enterprises have raised the IP consciousness, and safeguarded legitimate rights and interests by using the law as a weapon. Previously, Chinese enterprises did not have much experience in patent litigations and did not win many cases, however, they have raised the IP consciousness and significantly improved the ability in protecting themselves by using the law as a weapon. Chinese pharmaceutical enterprises won two patent litigations in 2017: in June, Huahai Pharmaceutical and its U.S. subsidiary Prinston won the patent challenge against Novem’s Brisdelle (paroxetine) capsules, which was the first case of a Chinese pharmaceutical enterprise winning the paragraph IV certification (PIV) ANDA challenge; in December, Luye Pharma won the infringement lawsuit on rivastigmine 1 day patch in Germany: the court maintained the first-instance judgment that rivastigmine 1 day patch did not infringe on the patent right, regardless of whether the original patent of Novartis was valid.

9. Nutrition and health industry market was the most promising. From the perspective of import data, the amount of import of nutrition and health food was USD 2.04 billion in China in 2017, growing by 32% year on year. The hot varieties with fast growth on the market included protein powder, calcium preparations, vitamins, ginseng products, bee products, and fish oil, etc. The registration and filing "double-track system" policy was officially implemented in 2017, enterprises’ burden was lighter, and the new regulatory pattern of "filing in the majority, and registration and approval in the minority" gradually formed, to promote the benign development of the health product market.

Also read： CCCMHPI: Data of China’s Pharmaceutical Foreign Trade in 2017

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