Local Expertise Key To Tackling China Market: AusBiotech Meeting
This article was originally published in PharmAsia News
Executive Summary
Speakers from the legal, corporate and contract research sectors discussed the fast-moving changes that are impacting the legal and regulatory aspects of doing business in China at the recent AusBiotech conference in Melbourne, providing a broad range of advice for Australian and other pharma and biotech companies wanting to enter the rapidly expanding Chinese life sciences market.
MELBOURNE - AusBiotech’s chief operating officer Glenn Cross chaired a “Doing Business in China” panel session at the Australian biotech association’s October conference in Melbourne, which discussed changes affecting the legal and regulatory aspects of setting up and operating a life sciences business in China.
Global law firm King and Wood Mallesons (KWM) partners Kim O’Connell, (Melbourne) and Mark Zhang (Shanghai), Vice President, Strategy and Corporate Development at CSL Ltd. Dr. Sergio Scrofani (Melbourne HQ), and Quintiles Transnational Holdings Inc. East Asia Pty. Ltd, Director, Regulatory Strategist, Kwee-Tat Chew (Singapore) all took part in the session.
Cross asked Scrofani what the main changes had been in China in the last two years. Scrofani responded, “The level of sophistication of local players in China is increasing and the competition from local and foreign equity is challenging. There is certainly a lot more information on data in China.”
“It is very important to align yourself with good quality Chinese advisors. We work with many local contacts. If you don’t have a local Chinese presence, have someone to help you like Austrade [the Australian Trade Commission] which has been very supportive to CSL while we have been doing business in China,” Scrofani advised.
Australia’s largest biopharma company, CSL has been in China for almost 20 years. Its CSL Behring site reveals that the company is now the leading supplier of imported albumin in China, a life-saving product derived from human plasma which is used in treating burns and restoring blood volume after trauma or surgery.
According to its 2013-14 annual report, Melbourne-based CSL employs 13,000 staff in 27 countries and has manufacturing operations in Germany, Switzerland and Australia. The company has one of the largest plasma collection networks globally and operates the only influenza manufacturing facility in the Southern Hemisphere.
Scrofani commented that Austrade has been very helpful to CSL in getting introductions to companies and the government in China. “If you want to talk with Chinese government officials, being introduced by Austrade is very valuable in your negotiations. Also when dealing with Chinese government officials, you need to have a specific business plan and business in mind. Don’t put them in a position which will embarrass them.”
“It’s very important to align yourself with good quality Chinese advisors” – Dr. Sergio Scrofani, CSL
Scrofani said, “CSL has partnered with Cardinal Health Inc. who does all our distribution in China. When we were first talking with Cardinal we were looking for a company with a good reputation, which Cardinal has.
Mutual Interest
KWM’s O’Connell said that there is an increased level of investment in life sciences in China due to growing sophistication and the growth of the Chinese market, and that there is also constant interest from China in Australian life sciences and nutraceuticals.
Zhang told the conference that KWM has 13 offices in China, with his division focusing on health care, medical devices and the pharma industry, helping clients set up factories in China and assist with intellectual property (IP) issues.
But he said that “Better aged care services are needed in China. It is also very difficult to get access to life sciences products. In a single month, alone, I received three Israeli delegations looking to partner with Chinese companies.”
As for Quintiles, Chew said the firm “helps companies deliver clinical trials globally. We have specialists in place and know the local laws. In China and Taiwan alone we have 200 studies comprising 50,000 patients recorded. For Australian companies that want to come to China or Chinese enterprises that want to do business in the USA, we can assist with strategic drug development.”
O’Connell advised that the China Australia Free Trade Agreement
(ChAFTA) gives Australia advances in the health care sector. For pharmaceutical and medical devices, the reduction of tariffs will result in better and more health care facilities, he predicted.
According to the Australian Department of Foreign Affairs and Trade timeline for ChAFTA, after both Australia and China complete their domestic processes, both countries will exchange diplomatic notes to certify that they are ready for ChAFTA to enter into force.
ChAFTA will then begin 30 days after this exchange or on a date otherwise agreed. The Australian Government wants the ChAFTA entered into force before the end of this year.
Chinese Regulatory Reforms
Chew highlighted recent changes to the China FDA’s drug development process and in particular the State Council’s Advice on reforming the drug and medical devices review system. There are five main objectives of the reforms. These are to:
- improve the quality of reviews in the approval system;
- resolve the backlog of around 19,000 product registration applications in the approval system;
- improve the quality of generic drugs;
- encourage new drug research and innovation; and to
- increase transparency and review the overall system.
Chew also advised that a new fast-track approval system for medical devices is being introduced.
Zhang said that he received a circular recently that the CFDA is planning to process all the backlog cases in three years, and he noted that around 8,000 applications are received each year (Also see "NDAs Face Rejection As China FDA Starts ‘Intensive Review’" - Scrip, 17 Nov, 2015.).
He then spoke at length on the legal and other key issues for companies wanting to enter the Chinese market, outlining a range of different options.
Companies that want to sell their products in China need to set up an offshore entity, as the CFDA is reluctant to issue new trading licenses.
A wholly owned foreign enterprise (WOFE) can set up a joint venture with a Chinese company and although it does not manufacture in China can sell drugs and products within the scope of its trading license. A repacking license is required by the WOFE and this repacking must be done by a Chinese manufacturer that has Good Manufacturing Practices (GMP) certification.
To enable the manufacture of its products in China, the WOFE needs to establish a joint venture with a Chinese manufacturer and both companies must be GMP-approved. A manufacturing license is required for this to occur.
If a company wishes to register its products in China, it also needs to find a Chinese partner.
Zhang added that KWM had been receiving a lot of requests from Chinese companies that require help in developing a Code of Conduct, which they need to have to deal with a foreign company.
“A key point in doing business with China is to understand all the procedures, read all the documents you are provided with and consider all risks,” he advised.
Preparing For IP Registration
KWM’s O’Connell stressed the importance of thoroughly preparing for IP registrations for businesses in China. “The IP area in China has changed dramatically over the past few years. You need to be ready and prepared and there are different aspects of IP that need protecting.”
She told the AusBiotech meeting that copyright is protected by the international copyright symbol (©) and that this can cover artists and design for example. If you want to enforce copyright registration, it is essential to register for copyright protection in China, and if a product has been trademarked in Australia, it should also be trademarked in China.
“The IP area in China has changed dramatically over the past few years. You need to be ready and prepared” – Kim O’Connell, KWM
O’Connell emphasized, “To protect your IP, you need to copyright and trademark all of your materials in China. Patents are very important for biotech and pharma and in China there are three forms of patent protection: 20 years of protection, utility protection and fast-track utility.”
She added that if firms want to apply for patents in China, get legal advice upfront to see if registering at the local level is the best option. “When entering any type of agreement, particularly rights protection in a joint venture and employees rights, (if they were paid for the invention), get professional advice.”
For Australian firms, the Australian government’s IP Australia site provides detailed information on registering IP in China for trademarks, patents, designs and copyright and the relevant government organizations to register with. It stresses that unless businesses have a residential or business address in China, applications must be filed through Chinese agents or attorneys.
It states that documents filed with the State Intellectual Property Office of China or the Chinese Trade Mark Office need to be submitted in Chinese, therefore translation fees should be factored into the total cost of applications. Copyright protection can be applied for through the National Copyright Administration of China.
However, as IP protection remains a challenge in China, IP Australia strongly recommends that Australian businesses have formal legal protection of IP rights in place long before entering the Chinese market.