Building bridges to innovation - BioCentury China Healthcare Summit

WORKING DRAFT

Building Bridges

to Innovation

Shanghai, November 12-13, 2014

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DISCLAIMER

1

McKinsey & Company | 2

Draft

reimburse-

ment pricing

policy

New R&D

models and

commitments

Signal or

Noise?

Large scale

manufacturing

investments

2nd largest

pharma market 文本1

New regulatory

hurdles

Record

compliance fine


Managing today

Today’s discussion

Framing the

possibilities

Bridging to

tomorrow


Framing the possibilities

McKinsey & Company | 5 SOURCE: CPA; McKinsey analysis

Drivers of demand remain strong

1 At retail price (base case)

China’s Rx market1 , RMB Trillion Key growth drivers

Rising middle class

Massive urbanization Aging population

Universal insurance

coverage achieved

3.1

1.9

1.0

0.7

2013 2020

+14% p.a.

2015 2025

+10% p.a.


China’s pharma market in context

SOURCE: Euromonitor; Lit research; McKinsey analysis

31%

20%

24%

45%

8%

China market contribution to global sales

Percentage

Industries

Luxury

good

Electronics

Pharma

Auto

Mineral

products

One-fifth

of Apple’s

sales

One-fourth

of Prada’s

sales

BMW’s

largest

market

McKinsey & Company | 7 SOURCE: Industry association; Evaluate; McKinsey analysis

China’s contribution to pharma MNCs continues to rise

China Rx sales in global Rx sales

Percentage

1.8

2.4

2.5

2.8

3.7

3.8

5.0

7.5

7.7

11.3

MNC5

MNC1

MNC8

MNC7

MNC6

MNC9

MNC4

MNC10

MNC3

MNC2

2013

Top 10 average：4.2%

Change since 2011

2.5

-0.2

3.4

2.1

1.2

1.0

0.4

0.9

0.1

-0.2


Incremental $1 billion committed to China by MNCs

in last 12 months

SOURCE: Lit research

New R&D center co-

located with

ShanghaiTech University

$130 million to expand

packaging and logistics

in Beijing

$300 million in new

production base in

Xi'an; launching the

Asia-Pacific Innovation

Center in Shanghai

$105 million for bulk

production and

packaging in Nantong

5th Global R&D hub with

plans for 1,400 staff in

Shanghai

$325 million in insulin

plant in Suzhou

NOT-EXHAUSTIVE


Select recent trends impacting the market

Emergence of new

commercial models

Wave of entry into IT

healthcare

Growing role for

private capital

Rise of domestic

players, in quality

and innovation Regulatory hurdles

Direction of

reimbursement

pricing policy

Slowdown of

China’s growth

Market access

challenges


Emergence of new commercial models

SOURCE: Lit search

Distri-

butor

CSO

Jan July Sept Oct 2014

MSD contracted out selected

brands to SMC for lower tier

cities

Pfizer joined forces with

Sinopharm to penetrate

county hospitals

AZ outsourced sales of

Betaloc to Sinopharm

Ablynx signed exclusive license

with Eddingpharm

Mallinckrodt outsourced

sales of Loversol to

CRH


Wave of entry into IT healthcare

SOURCE: Lit research; Team analysis

Digital giants Entrepreneurs Healthcare IT

$100 MM

$170 MM

$70 MM

Online

scheduling/

EMR

E-commerce

pharmacies

Physician

and patient

networks

Personal

healthcare

Launch of

“Jiangkangyun”


October: Ottawa - Shanghai

Joint School of Medicine

April: UCLA - Centre Testing

International Corp

John Hopkins - Sun Yat-Sen

University

Mayo Clinic - Wuhan

Kindstar

August: Duke - Kunshan

University

September: Partners Healthcare Int’l - Shanghai Jiahui Hospital

University of Cincinnati – Chongqing Hospital

Growing role for private capital

Global institutions Local & Asian players

SOURCE: McKinsey analysis; Literature search

1997 2010 2012 2013 2014 2015

United Family

(Beijing)

Foshan Chancheng

Hospital

December: Peking

University International

Hospital

Red Leaf

Kunming Children

Hospital

March: Parkway – SH

int’l Medical Centre

October: MGH –

Hengqin Hospital


2 billion

10 billion

10 billion

(To be

constructed)

Administration Building

Formulation R&D

Oncology

Rise in quality and innovation of domestic players

SOURCE: Literature search; McKinsey analysis

Quality

Innovation

5238

31159

2009 2013 12 11 10

+55%

229

15514610789

+27%

2014 12 13 11 2010

Innovative pipeline by Chinese pharmacos2

US ANDAs by Chinese pharmacos

41 Chinese pharmacos FDA approved for FDF1

1 Final dosage form. Includes manufacturing outside of China

2 New Class 1 drugs from preclinical, excluding biosimilars and reformulations 18 Class I drugs approved from 2008-2013

Huahai


Proposed pricing policy for reimbursed drugs

SOURCE: NHFPC; NDRC; Industry association; expert interviews; lit search; team analysis

42

42

34

11 53

76

Example: reimbursement-based pricing for statins (weekly price)

RMB

61

42 11

15

Gx 53

MNC 76

Today

OOP Reimbursed

Pricing Bureau Chief conference on October 27 suggested reimbursement –based pricing policy will

be implemented in 2015

▪ Implementation plan reviewed by State Council on November 2014

▪ Implementation to begin in January 2015

▪ Same set reimbursement amount will be applied for identical molecule and formulation,

regardless of whether the drug comes from originator or generic

Proposed reimbursement pricing policy

Note: assumes Originator and Generic are currently both reimbursed at 80%, maintain current retail price are subject to same reimbursement amount in

the future


2009 2004 2015+

NRDL update delayed


Initial NRDL

published by

MoHRSS, ~900

Western medicine,

~ 600 TCM

Updates planned

every two years

Broad upgrade

with several

important

molecules added

List reaches

2,150 molecules

Targeted

therapies not

included

Plans to initiate

new NRDL

adjustment

Official

announcement

yet to be made

2000

1,535 366 249

~43 ~125 ~220 ~275

Molecules

added

UEBMI

covered, MN

?

n/a n/a ~182 ~300 URBMI

covered, MN

Note: URBMI reimbursement scheme created in 2007; actual reimbursement varies by province and by scheme


Change of interpretation of CFDA regulatory review

New MRCT interpretation

SOURCE: Interviews, team analysis

Examples of therapies impacted

From “two

applications, two

approvals” to “three

applications, three

approvals”


Individual MNC position on China driven by various factors

Ambition

and

objectives

for China

▪ Opportunities ex-

China (e.g., Japan)

▪ Pipeline profile

▪ Size and

past

performance

of China

business

▪ Portfolio

profile

versus

China needs

and priorities

▪ Exposure to

recent news

(e.g. EDL,

NRDL)

▪ CEO’s core

beliefs on

China

▪ Trust in

China

team’s

execution


Broken bridge 3 Narrow bridge 2 Broad bridge 1

Bridging to innovation – potential scenarios by 2025

▪ Mature drugs have

lasting staying power

and continue to grow

beyond 2020

▪ China delivers

meaningful and broad

step-up to reward of

innovation

▪ Mature drugs have

staying power, but

come under stronger

pressure and plateau

beyond 2020

▪ China delivers

meaningful but

narrow reward for

innovation, closely

aligned with disease

priorities

▪ Window for mature

drugs starts closing

rapidly by 2020,

earlier for some drug

categories

▪ Innovation remains

heavily constrained

▪ Self-pay market

becomes main viable

segment


Gx landscape

Pricing and

reimbursement

Other

mechanisms

Other funding

mechanisms

CFDA approval process

RDL - update frequency and scope

Selected key swing factors impacting scenarios

▪ Fragmented landscape with unproven quality standards (status quo)

▪ Fragmented landscape with some proven quality Gx players

▪ Consolidated landscape with large proven quality Gx players

▪ Moderate pricing pressure on mature brands (status quo)

▪ Significant pricing pressure on mature brands

▪ Heavy pricing pressure on mature brands

▪ No forced substitution of Gx (status quo)

▪ Forced substitution of Gx enforced for selected TAs

▪ Forced substitution of Gx enforced broadly

▪ Large self-pay market emerges, complemented by PHI, other schemes

▪ Strong self-pay market emerges, complemented by PHI, other schemes

▪ Self-pay expands but with limited support by PHI, other schemes

▪ Shorter delay versus global timelines applied broadly

▪ Shorter delay versus global timelines applied for select TAs

▪ Multi-year delay versus global launch (status quo)

▪ Frequent, targeted RDL updates

▪ Frequent, broad RDL updates

▪ Infrequent and narrow RDL updates (status quo)

Ma

ture

bra

nd

s

Inn

ova

tive

dru

gs


Broken bridge 3 Narrow bridge 2 Broad bridge 1

Bridging to innovation – Scenarios through 2025

MNC pharma – total sales

DIRECTIONAL

25 20 15 10 25 20 15 10 25 20 15 10

Innovative

Mature

Innovative

Mature

Innovative

Mature

SOURCE: Industry association; team analysis

Note: Curves are informed by high-level, but realistic assumptions


Regardless of final outcome, two imperatives for MNCs

Broken bridge

Narrow bridge

Broad bridge

Bridging to tomorrow’s innovation

Managing today’s mature portfolio


Managing today’s mature portfolio


20,000

100,000

80,000

60,000

40,000

2006 2004 2002 2012 2010 2008 2014 E

Top 15 MNC companies sales

A brief history of MNCs commercial performance in China

SOURCE: Industry association; Team analysis

RMB millions

“Rebalancing era”

7.4 12.6 13.1 2.4

“Hyper-growth era”

7.2 8.0 11.7

“Relevance era”

Incre-

mental

growth

RMB bn

China pops up on

the map

Some invest ahead

of the curve

19%

25%

13%

China’s economic boom

Healthcare reform

Large and rapid field

force expansion

Access initiatives

Market turbulences

Closer look at productivity

Rebalancing

of investments


Seven observations on mature brands

Leaders - Consistent growth performers emerging

Productivity - Productivity gains becoming key to performance

Alternative models - Accelerating adoption of alternative commercial models

Competition - Some mature brands facing strong pressure from Gx

Concentration - 3 brands account for ~55% of portfolio

Variance - Significant variance in mature brands performance

Growth - Mature brands launched 10+ years =70% of sales and growth

7

5

6

4

3

2

1


Mature brands launched over 10 years ago – ~70% of sales


Average composition of MNC portfolio in China today1

1 Based on 2014 H1 sales

▪ Under pressure from policy and industry

trends

– Gx competition

– EDL

– Potential pricing policy changes

▫ Elimination of individual pricing

▫ International reference pricing

▫ Reimbursement-based pricing

▪ Critical importance of introducing

innovative brands

– Unmet medical needs

– Sustainability of business model

– Higher patient affordability (i.e., self-pay

market, PHI)

~8%

~72%

Off-patent

Launched >10 years

~20%

Off-patent

Launched <10 years

Patented

Mature portfolio

Innovative portfolio


48

77

63

61

43

44

56

44

SOURCE: Industry association; McKinsey analysis

61%

77%

73%

41%

90%

37%

60%

37%

16%

7%

40%

53%

38%

19%

20%

8%

100% 0%

MNC 5 10% 0%

MNC 2

2%

MNC 7 10%

MNC 6

MNC 4

MNC 3

MNC 8

MNC 1 2%

1 Measured by year of registration

2012-2013 growth breakdown by brands launch year1

RMB billions, Percent

2014H1 sales contribution of

top 3 brands

Percent

>10 years 5-10 years <5 years

55%

Mature brands drive 70% of growth; 3 brands account for ~55% of portfolio


3,500 2,000 1,500

100

0

15

2013 brand size RMB millons

2011-2013 CAGR Percent

Significant variance in mature brands performance


Note: Analysis for off-patent brands larger than RMB 250 mn

1,200

600

Rising stars Growth

engines

Laggards

Slowing

engines

30

20

BCG

McKinsey & Company | 28 SOURCE: Industry association; McKinsey analysis

2011-2013 CAGR, Percent 2013 brand size, RMB Billions

2.0

2.1

1.7

2.9

1.5

3.4

2.0

3.4

32

15

25

24

21

14

42

18

Significant variance in mature brands performance - large brands can

deliver above market average growth

15% Industry average

McKinsey & Company | 29 SOURCE: SMEI; McKinsey analysis

177107

22

1124% 58

25%

24%

48%

26%

11

27%

30%

33%

34% 29%

31%

Local 2 31%

24% +54% p.a. MNC

13

33% Local 1

12 10

42%

09

Local 1:

▪ Tailoring approach based on

physician segmentation and

engagement of non-

clinicians

▪ Providing medical support

Local 2:

▪ Expanding through staged

hospital segmentation

▪ Leveraging clinical trial

evidence

Market share for cancer drug, molecule X

Mn RMB, %

1 Among SMEI sample hospitals

Leading local Gx players

Some mature brands facing strong pressure from Gx competition


Co-

promotion

Adoption of alternative commercial models accelerating

SOURCE: McKinsey analysis

NOT EXHAUSTIVE

Partnership type

Distributor CSO Joint-

Venture

Out-

licensing Distributor

reps

In-direct Hybrid


Consistent growth leaders emerging despite market turbulence YoY MNC revenue1 growth

Percent


14%

23%

29%

9%

30%

-3%

11%

-10%

21%

-4%

21%

9%

-8%

-6%

1%

4%

5%

6%

Inconsistent growth performance

1 Rx only

MNC 6

MNC 7

MNC 8

MNC 9

MNC 10

MNC 11

Average

MNC 1

MNC 2

MNC 3

MNC 4

MNC 5 23%

23%

29%

18%

17%

2013-2014H1 2012-2013 2011-2012

11%

25%

14%

13%

18%

16%

14%

17%

19%

20%

Consistent growth performance

Only 2 companies consistently outperformed average MNC market since 2011

21% 13% 12%


Seven commercial imperatives for mature portfolio

Clear and decisive

portfolio choices

Market development

for sustained growth

Rigorous SFE fundamentals

to drive productivity gain

“War game”

mindset to cope

with Gx

competition

1

2

4

3

5

6

7 Alternative

commercial

models for

flexibility and

lower cost

New reimbursement-

based pricing

preparation

Granular mining

of data to inform

better decisions


Clear and decisive portfolio choices


1

Hybrid

In addition to direct rep coverage

▪ Co-promotion with pharmaco

▪ 3rd party partnership with

distributor(s)

▪ Digital communication

Direct

▪ Dedicated field force

▪ Low cost reps

▪ Digital field support

Indirect

▪ Outsource to CSO

▪ Outsource to distributor

▪ Out-license to pharmaco

▪ 3rd party digital forums

▪ Business scale and growth potential

– Brand size

– Size and growth of defined market

▪ Strategic fit based on TA priority, and

overlap with key brands

▪ Opportunity to develop the market

Attractiveness

▪ Level of differentiation on efficacy,

safety and formulation, other factors

▪ Market competitive intensity

– “Generics index”

– “Who are the competitors”

▪ Market access challenges, e.g., EDL,

NRDL

Feasibility for success

Prioritize portfolio Define coverage model

Prioritized

Deprioritized


2001-2014E - Statin MNC sales

RMB billions


2010-2014

CAGR

37%

2010-2014E - Modern insulin MNC sales

RMB billions

2010-2014

CAGR

36%

Market development for sustained growth 2

▪ Shaping national guidelines with

NHFPC

▪ Large-scale screening programs

▪ Disease awareness programs

▪ Government training partnerships

▪ Chinese Academy of Sciences

partnership for physician education

▪ Patient education centers

6

8

4

2

0

06 04 02 08 12 10 14E 14E 13 12 11 10

8

6

4

2

0


Alternative commercial models for flexibility and lower cost


Growth

expectations

of portfolio

GTM model assessment

3

Indirect

Hybrid Co-

promotion

Distributor

reps

CSO

Mid-low Out-

licensing

Mid-low Distributor

Effectiveness Economics

Operational

control Time to impact

Mid-low

High

Mid-low

JV High-mid


Multi-faceted

approach

New reimbursement-based pricing preparation


4

Brand Physicians

▪ Raise level

of physician

interactions

▪ Communi-

cate brand

value

proposition,

beyond

quality

differentiation

▪ Communi-

cate brand

value

proposition

broadly,

including

digital and

social media

▪ Define clear

value

proposition,

beyond quality

differentiation

▪ Review

pricing

strategy with

patient OOP

relative to value

▪ Clarify patient’s drivers of

brand choice and what they

value

▪ Assess patient OOP relative to

brand value

▪ Segment patients for behaviors

and attitudes

▪ Listen to social media sources

and understand implications

Patients


▪ Develop robust

account-by-account

planning with better

segmentation tailored

for competitive

dynamics

Rigorous SFE fundamentals to drive productivity gain 5

▪ Seamlessly

integrate internal

sales data and

external market

data to provide

timely assessment

of SFE

▪ Relentlessly drive

on the ground

execution by

improving DSM’s

coaching

effectiveness

▪ Provide opportunity

for career

development

for sales force

in mature portfolio

▪ Build and maintain

trust between front

line reps and central

functions

Better

segmenta-

tion

Integrated

CoE

On the

ground

execution

Talent

development

and retention

Drive

productivity

increase


“War game” mindset to cope with Gx competition 6

Tendering Hospital listing Physician

prescription Patient access

▪ Promote switch by

generating head to

head clinical

evidence with

originator

▪ Use channel

margin to claim

share in retail

pharmacy chains

▪ Partner with

online retailers

▪ Large scale

government

collaboration for

grass root market

▪ Leverage strong

commercial

capabilities and

collaborate with

distributors for

listing

ILLUSTRATIVE

Local companies are becoming more sophisticated –

consider their point of view when crafting strategy

How a local company may approach the market


Granular mining of data to inform better decisions 7

Call activity by rep

Listing by hospital and city Sales and market share by city

Sales and market share by hospital

SOURCE: COMET by McKinsey


Bridging to tomorrow’s innovation


Innovation – where we stand today

Innovation is a stated strategic

priority for China

However, reward of innovation remains

heavily constrained

The industry is broadening and deepening

its commitment to innovation

1

3

2


Innovation is a stated strategic priority for China


Government support

Enabling infrastructure Local innovation

MNC investment

Innovation

ecosystem

McKinsey & Company | 43 SOURCE: New England Journal of Medicine; Patentscope; Pharmaproject; GBI; Literature search; McKinsey analysis

1 Including drugs and medical equipment, with the latter accounting for around 10%

2 Patent filing after 2012 is not fully disclosed given the 18-month confidentiality period for patents

The industry is deepening and broadening its commitment to innovation

39

33

1821

119

2012 08 09 2007

+33% p.a.

11 10

Number of international drug

patent filing filed by Chinese

residents2 doubled from 391 in

2007 to 756 in 2011

Industry investment in China biopharma R&D1

RMB billions

▪ Announced: RMB3 billion investment to

source external innovation to China

▪ Aim to incubate: 90-100 startups within 3 years

in China

March

June Opened up service platform and manufacturing

capacity

Attracting overseas biotech companies to

develop innovative drugs in China

Established Asia-Pacific R&D center in

Shanghai to strengthen China R&D efforts

September

Opened Shanghai Innovation center to source

early stage innovation from China/Asia

October


1.7

2.0

3.8

2.2

Innovation remains heavily constrained - many drugs launched in

developed markets not yet available in China

Global sales

$ Billions, 2013

SOURCE: EvaluatePharma; GBI

US

launch

2009

2006

2011

2011

50% of the top

selling global

drugs launched

since 2008 are

not yet

accessible to

Chinese

patients

Japan

launch

2010

2011

2012

2014

Recently launched drugs not yet in China (examples)


0

0

0

0

0

0

0

2

0

0

1

2

MNC 4

MNC 3

MNC 2

MNC 6

MNC 9

MNC 8

MNC 10

MNC 12

MNC 11

MNC 5

MNC 7

MNC 1

1

1

2

1

2

0

1

0

1

1

3

3

1

1

3

0

1

0

1

1

2

3

2

3

0

0

3

1

1

2

0

3

1

1

1

4

Distribution of new molecule launches by lag duration,

2006-20121 # of drugs

<2 years 2~4 years 4~6 years >6 years

Total 5 16 18 17

1 New molecules that were registered for CFDA and were successfully launched from 2006 and 2012; vaccines and drugs with global launch dates

before 1990 were excluded

SOURCE: GBI; lit research; team analysis

NON-EXHAUSTIVE Innovation remains heavily constrained - significant historic

launch lag relative to developed markets


Innovation remains heavily constrained - latest pathway

interpretation from the CFDA

SOURCE: CFDA; Interviews, team analysis

1 For chemical new drugs only, biologics timeline is longer due to additional sample testing and full phase 1-3 clinical trial requirement

Queue time

After

2014

China registration process for imported drugs1

CTA with

MRCT data

IDL with

local data

Local

trial, PK

CTA with

MRCT data

~ 2 yrs

~ 4 yrs

2.5 yrs

2.5 yrs

PK, MRCT

Phase 3 CTA

PK, MRCT

Phase 3 CTA

Before

2014

NDA,

CPP Phase 2/3 Phase I

~2 yrs

PK, MRCT

Phase 3 CTA

4 mo 7 mo 1~2 yrs

Global development process

China IMCT process

IDL with

MRCT data

IDL with

MRCT data

Potential

additional

2-4 years

Scenario 2: Local trial required

Scenario 1: Local trial waived


Innovation remains heavily constrained - on average, slow uptake at

launch


Leading new drug launches

2008-2010

RMB millions

0

100

200

300

400

500

600

700

2013 12 11 10 09 2008

Number of new launches

Average sales of new drug launches1

2008-2011

RMB millions

5 14 8 5

0

100

200

300

400

500

600

700

2011

2010

2009

2008

2013 12 11 10 09 2008

1 Patented drugs from top 10 companies


Innovation remains heavily constrained - many therapies on market still

waiting for reimbursement

SOURCE: Team analysis

Ten Class 1

drugs launched

since 2008 by

Chinese

companies are

still not on

NRDL

8 NRDL

Non-NRDL 62

70

New drug launches

2008-2013 Selected brand by launch year

2009

2010

2008

2011

Drugs

launched

before

2008

waiting

for RDL


Long time to market

▪ Complex regulatory

framework

▪ Slow CTA timeline

▪ Changing interpretation

of regulation

▪ Historic gaps in local

MNC R&D capabilities

and role of China in

global R&D decisions

Slow uptake

▪ Fragmented and

inefficient listing and

tendering processes

▪ Infrequent and narrow

RDL updates

▪ Slow adoption speed

of innovative therapies

▪ Mindset of MNCs?

Constrained peak sales

▪ Low awareness/

diagnosis

▪ Gaps in physician

education

▪ Constrained patient

affordability

▪ Early development of

PHI and alternative

funding mechanisms

▪ Lack of market

development?

In summary – Constraints of innovation and root causes

Sales

Time

NON-EXHAUSTIVE


Reach peak sales potential

▪ Develop the market

(e.g., earlier and

broader diagnosis,

raising awareness of

therapy benefits,

greater adherence,

alternative funding

mechanisms)

5

Shorten time to market

▪ Prioritize your portfolio

within existing

regulatory framework

▪ Partner with locals

▪ Engage regulatory

bodies as an industry to

design a new

framework

1

2

Accelerate uptake

▪ Develop the market,

including activating self-

pay segment

▪ Demonstrate economic

value of drug

▪ Explore price-volume

trade-offs

▪ Engage regulatory

bodies as an industry to

design a new framework

3

4

Sales

Shifting the curve – What could be done NON-EXHAUSTIVE

Across the board critical need to engage regulators at

central and provincial levels

How to do so individually and collectively as an industry?

Time


Prioritize portfolio within CFDA framework

SOURCE: Interviews

ILLUSTRATIVE

1 If 'perfectly' simultaneous, otherwise 2-4 years of delay

>5 years ‘Classic’ local trial 3

<4-6 years China as part of

global trials 1

<4-6 years1 China in parallel

regional trials

~4-9 years China in sequential

regional trials

Comparisons of process and timeline of drug registration with CFDA Resulting lag

1

No lag China local program 4

CPP CTA China

trials Global Ph III trials NPA

CTA China

trials

CTA, with

MRCT data

Global Ph III trials CPP

CPP Global Ph III trials

CTA Regional

trials

CTA, with

MRCT data

NPA CTA

CPP Global Ph III trials

CTA

Full

China

trials

NPA

NPA

NPA

CTA, with

MRCT data

2A

2B Regional

trials

McKinsey & Company | 52 SOURCE: McKinsey analysis

NOT EXHAUSTIVE 2

MNC strategic objectives

Co-development

of local player’s

assets

Co-development

of MNC assets

Collaboration

between MNC

and local player

Partnership

type Leverage local capabilities

and strengthen local presence

Acquisitions

Partner with locals

Capture local innovation Accelerate local registration

Joint-ventures

Venture capital


Explore price-volume trade-offs

SOURCE: Clin Microbiol Infect 2011; 17: 107–115; Literature search

900

Egypt

55,000

84,000

Europe

1,900

India

US

3

▪ What are

implications

for the China

market, across

TAs?

Sovaldi treatment cost

per patient

USD

18

12

18

5

HCV patients

Millions


Market access

Engage regulators as an industry to address key challenges

SOURCE: Expert interviews

4

MNCs Locals

▪ Lack of patent compensation system

▪ Patent link system not functioning in practice

▪ Long and complicated tendering process; lack of standards across

provinces

▪ Lack of reimbursement mechanism for innovative drugs

Regulations

▪ Long IND process and requirements for IND document

▪ Insufficient resource and capability from regulatory agency

▪ Lack of MAH system and investment requirement for manufacturing

Common challenges faced by pharma industry – examples

Regulations

IPR


Private research funds and leading

pharmacos (MNC and locals)

Develop the market – example potential collaboration on China cancer

research

SOURCE: McKinsey

5

Such a platform

could benefit

the industry as

a whole by

promoting

innovation, and

is beyond

any individual

pharmaco’s

influence

Physicians

Evaluate protocol

and distribute

funding

Provide

communication

and education

Cancer multi-center

research platform +

MoST +

NHFPC


Closing thoughts

China continues to be a huge growth opportunity,

with significant unmet needs to address 1

2 We are at a critical juncture with three

plausible scenarios through 2025 – broad bridge,

narrow bridge, broken bridge to innovation

3

The industry has a key role to play collectively and

individually in building a broader bridge to innovation ▪ Prioritize China

▪ Develop the market

▪ Build trust across the ecosystem


For more on China healthcare

Industry insights Collaboration with CPA

2014

2013

2012

www.mckinseychina.com

▪ Data driven periodic reports

▪ TA specific deep-dive (e.g.,

oncology, immunology)

▪ How sick is China's

pharmaceutical market?

▪ Will market forces

revolutionize Chinese

healthcare?

▪ What healthcare system

can China afford?

▪ Will the next medical

equipment champion

come from China?

1

2

3

4

iTunes Store –

“McKinsey on China”

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WORKING DRAFT

Building Bridges

to Innovation

Shanghai, November 12-13, 2014

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