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Cashing in on our pharmaceutical expertise

Canberra Times - Monday, 11 April 2005

Cashing in on our pharmaceutical expertise

Dr Thomas Faunce

THE AUSTRALIA-China Trade and Economic Framework, signed during the
recent visit of Chinese President Hu Jintao in October 2003, includes a
commitment to conclude a Free Trade Agreement feasibility study by
October 31 this year. It is designed to build on Australia’s commercial
relations with China in a number of key sectors, including

In this context, one important provision in a China-Australia Free
Trade Agreement could be the establishment of a Medicines Working
Committee. This committee would facilitate cooperation, collaborations
and joint ventures between Australian and Chinese pharmaceutical
regulators, clinical trial and biotechnology researchers, as well as
generic manufacturers.

Such an initiative would build on previous Government efforts to spur
the growth of an Australian pharmaceutical industry. In May 2001, the
then Minister of Industry, Tourism and Resources announced a
Pharmaceuticals Industry Action Agenda. Its objectives were to : promote
increased investment in pharmaceutical goods and services (action 2) ;
identify opportunities and facilitate growth in the export of
pharmaceuticals (action 7) promote two-way movement between industry and
academia (action 11) ; and align industry activity with the National
Innovation Awareness Strategy" (action 14).

A Medicines Working Committee in the FTA would facilitate these

There are many reasons why the Chinese would seek such a collaboration
with Australia. First, Australia possesses significant strengths in
pharmaceutical regulation and research.

These include : excellence in basic medical research ; excellence in
niche areas of biotechnology and pharmaceutical delivery systems ;
excellent clinical and medical training programs and hospital/health
infrastructure, very well integrated with basic medical R&D institutes.
There is also strong continuing support by Government for medical
research through the National Health and Medical Research Council.

Further, the Australian Department of Industry, Tourism and Resources
has recently administered a $300 million Pharmaceutical Industry
Investment Program rewarding pharmaceutical manufacturers undertaking
research and development in Australia. From July 1, 2004, a
Pharmaceuticals Partnerships Program provides an additional $150 million
for five years.

Australia can boast world’s best practice expertise in pharmaceutical
regulation through the Therapeutic Goods Administration, Pharmaceutical
Benefits Advisory Committee and its economic and pricing subcommittees.
Australia also has excellent capability in critical new knowledge areas
and platform technologies : genomics, bio-informatics fast screening and
world’s best practice ethical supervision.

The current Australian pharmaceutical manufacturing industry is small
by global standards, predominantly generic and characterized by much
cross ownership and licensing arrangements with large multinationals. It
would rapidly expand, however, if Australian manufacturers were accorded
access to the vast Chinese market through a free trade agreement.

In 2001, the sales income of China’s (mostly generic) pharmaceutical
industry totalled $US21 billion ($27.4 billion). China’s pharmaceutical
market has averaged 18-20 per cent growth over the last 20 years,
significantly higher than US and European growth over the same period ;
by 2020 it will be the world’s largest. It currently produces over 1350
medicines in 24 classes.

In recent years, China has patented only two "innovative" drugs
(arteannuin and sodium dimercaptosuccinate) that have received
international marketing approval. Yet China’s pharmaceutical production
capacity ranks second only to the United States, and it has strong
ambitions to move into "innovative" pharmaceutical production.

One of the most common models for pharmaceutical development in China
involves joint ventures with local partners facilitating regulatory
approval and market share. The commercial prospects for Australia
pharmaceutical firms (both "generic" and "innovative") participating in
such joint ventures would be significant. The infusion of venture
capital in either direction could enhance the commercialization of ideas
and facilitate rapid diffusion of technology.

One particular area of interest could be the opportunity to research
and develop for Western markets the unique active ingredients
traditional Chinese medicines. Creation of an evidence base to inform
government and industry decision-making is a crucial precondition for
the establishment of an innovative pharmaceutical industry. It is also
vitally important for instituting and maintaining the type of
pharmaceutical reference pricing systems present in the Chinese SFDA and
Australia PBS.

There, for social justice and economic reasons, governments bargain
down price and public expenditure is allocated chiefly to medicines
objectively demonstrating therapeutic and cost advantages over existing
competitors. A specific Annex in the China- Australia FTA could
establish a Medicines Working Committee facilitating regulatory
harmonization, research collaborations, clustering, networking and
partnership arrangements between pharmaceutical regulators, researchers
and managers of the two countries.

In particular, Australian PBS and China’s medicines price regulators
(SFDA) could discuss how best to signal the marginal cost of production
internationally. Focused State incentives for "innovation," outside
profit- driven intellectual property protection, the reduction of
development costs for "innovative’ drugs, global marketing strategies
for generic medicines and the human rights of workers in this industry
would be other particularly beneficial topics of discussion.

Dr Faunce is a senior lecturer at the Medical School and Faculty of Law
at the Australian National University and project director,
Globalization and Health, Centre for Governance of Knowledge and
Development, ANU.