Big Pharma's internationalisation of R&D to China
By Michael Hennigan, Finfacts founder and editor
Apr 21, 2015 - 7:45 AM

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Mainly American firms account for about 60% of Irish pharmaceutical and medical device exports but they do not engage in significant research that merits patenting. China has had a similar experience as regards R&D (research and development) but there is pressure on Big Pharma to increase international research while falling productivity of R&D in the US is also a push factor to increase activity in emerging markets.

Seamus Grimes, emeritus professor at the Whitaker Institute, National University of Ireland, Galway, Ireland, and Marcela Miozzo of the Manchester Business School,  University of Manchester, Manchester, UK, in a new paper, Big Pharma's Internationalisation of R&D to China, say that despite China's ambitions of promoting its own pharmaceutical sector, it is likely to continue to depend for some time on significant contributions from foreign companies. "While this situation provides considerable opportunities for big pharma companies to expand their markets in China, they are also hoping that offshoring aspects of their R&D to China may contribute to reconfiguring their current R&D model with its weak record of producing new drugs."

The authors say that drawing on interviews with a small number of pharma R&D centres in Shanghai, patent analyses and industry reports, "we provide insights into both the challenges and the opportunities associated with the early stages of establishing such centres in an emerging region with a rapidly growing market."

The authors conclude: "Despite the considerable investment by a number of big pharma companies in R&D centres in China to date, this investment is still in its very early stages, with big pharma aware that its success in the Chinese market depends on long-term investment. With China accounting for less than 3.0% of the global revenue of most big pharma companies to date, the complexity and fragmentation of China's market present particular challenges for big pharma companies. With much of the local market dominated by generic drugs and with the Chinese state determined to reduce the cost of its burgeoning health budget, which is largely made up of the cost of pharmaceuticals, the opportunities for expanding market share in China will be somewhat restricted."

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