There have been several articles on the China Pharma market recently, its development pipeline and the changes to the regulatory environment [1], [2], [3]. They paint a picture of R&D in transition; a provider of services becoming an innovator, a maturing pharma landscape that is increasingly more efficient and business-oriented, with cutting-edge research and development compliant with GCP standards. This comes after years of so-so quality and lengthy review and approval timelines.
These articles describe a pharma industry ready to take the next step, ie, developing a global footprint to join the established Pharma powerhouses in EU and the USA with portfolios, patents and operational structures to match the best.
There is no doubt that China has made great strides toward its goal of becoming a global player in just 10 years. The statistics uniformly indicate greater productivity: more drugs, more innovation, approvals and M&A deals.
A recent article in The Economist sums up the situation and provides valuable insights; it is worth reading (7 min according to the journal) [2]. Their assessment reflects our own experience in many ways. Having worked with Chinese companies for over a decade, we had a front-row seat at the changing scenery, the rise of top-notch R&D at pharma start-ups, and the efforts to streamline an antiquated regulatory environment. There is no doubt about the high medical and academic standards in China and the spirit of innovation in the ranks of their entrepreneurs.
While we agree with most of the points raised in The Economist article, we would like to share some thoughts of our own. Consider them comments, annotations or footnotes rather than corrections; like in music, we’d like to add some emphasis here and there, dynamic symbols, some sharps and flats, reflecting personal insights and lessons learned.
The time signature of the piece we call R&D is a fast allegro, for sure. The symphony is unfinished but the composers still very much alive. The orchestra is a youthful bunch of players, quite uneven in experience. All this will change, given the fact that pharmaceutical development has been one of the areas marked for progress in the last 5-year plan.
In the past, Big Pharma saw China as an attractive market for its drugs, making assumptions on profitability based on the country’s huge population of potential customers, the concentrated health care at large medical centers and a central payor streamlining reimbursement. What they did not understand (or want to consider) is that market size does not equal revenue potential.
China is still a difficult territory to navigate for foreign companies. Prices are highly regulated, set and readjusted yearly by NRDL, thereby assuring that revenue-generation is a fraction of what Western markets take in. There may be a few exceptions as they exist for any rule, but revenue-generating potential in China is significantly less than in EU countries, not to speak of in the US. The Economist is right to point out that China is a “tough place to make a profit”, echoing a recurring theme.3
Times are a-changing. For the first time in recent memory, Chinese companies find it difficult to attract foreign investment. Admittedly, the HK market and the central and regional governments provide funds and incentives, cheap loans and preferred / deferred tax status for start-ups, but foreign IPO money is incredibly tight. While the old concept was to set up subsidiaries in the US as a natural growth path, such expansion is now severely restricted by the lack of risk capital. Let’s face it: Western investors have much contributed to the growth of the China pharma sector as it exists today. With measly ROI, these investors have turned ever more skeptical in recent years [3]. Instead of funding their future competition, they now turn often to investments outside of China for better, more predictable returns.
This may change: in February 2026 when – as part of the next 5-year plan in China – the updated “Catalogue of Encouraged Industries for Foreign Investment” goes into effect.[4] As part of the effort, it emphasizes investment in novel drug development, biotech engineering, and radiopharmaceuticals, with specific mention of drug classes, biological targets, reformulation and chemical composition.[5] The document also addresses Tech Transfer, a topic that has recently drawn scrutiny by politicians. China may be more flexible in future years, but this remains to be seen.[6]
There is no doubt that review and approval processes have accelerated considerably. Still, there are deficiencies in study execution and quality. Review times of NDAs may have shrunk from 2 ½ years to 15 months, but US FDA reviews have also become faster in the same time frame. Then there are some China-specific hurdles like the HGR review process which easily adds 3 months, if all goes well. Chinese regulators will insist on ethnic sensitivity studies (PK and clinical) which will add years to any program, unless planned for proactively.
Doing studies in China is cheaper than elsewhere, right? Well, maybe. The cost of CROs has skyrocketed in the Western world over the last two decades, and the profit margins these companies command are eye-watering. Even if studies are conducted in low-cost Eastern Europe, CROs often charge US prices. In our experience, per patient costs in China are still considerably lower than in Western countries, but the gap is getting smaller as time goes on. However, the economy of scale (large numbers of patients concentrated at few large medical referral centers) remains a factor in favor of China. It is unlikely to change in the years to come.
The Economist article mentions other important trends. Big Pharma’s patent cliff is not a new phenomenon; companies have always relied on M&A to fill pipeline gaps and have no hesitation in buying assets in China. They now pay more attention to control of assets and revenue streams, while factoring in the impact of regulations and NRDL policies.
In the current economic climate, the NewCo concept is appealing. It is a topic for another blog…
ABBREVIATIONS
HGR Human Genetic Resources
NRDL National Reimbursement Drug List
NMPA National Medical Products Agency
CDE Center of Drug Evaluation
REFERENCES
[1] Liu S. The rise of China’s pharmaceutical industry from 2015–2024: a decade of innovation Nature Rev Drug Discovery 2025; 24:738
[2] Chinese pharma is on the cusp of going global. The Economist. Nov 23, 2025
[3] Groenewegen-Lau J. China advancing in drug discovery but needs foreign firms to get drugs to market. Mar 20, 2025 (accessed 1/6/2026) https://merics.org/en/comment/china-advancing-drug-discovery-needs-foreign-firms-get-drugs-market
[4] China updates Catalogue of Encouraged Industries for Foreign Investment. https://english.www.gov.cn/policies/featured/202512/31/content_WS6954a4a6c6d00ca5f9a0858c.html
[5] FineLine Cube. Investment in Healthcare with 2025 Catalogue. Dec 29, 2025. https://flcube.com/?p=52124 (accessed 1/6/2026)
[6] China says it opposes forced tech transfers. chinadaily.com.cn – Updated: 2025-10-15 (accessed 1/6/2026) https://global.chinadaily.com.cn/a/202510/15/WS68ef8c89a310f735438b52fd.html
