Betting big in China - but will it pay off for Pharma?

For 18 out of the last 20 centuries, China has stood as the world’s most innovative and largest economy - only to have been displaced in the last two. However, the tables are turning once more, as pharma companies bet big by shutting down sites in Europe and the USA and expanding their R&D operations in China, particularly in Shanghai and Beijing. A large proportion of the pharma industry believes pharmaceutical innovation will accelerate in the East and that local R&D will develop a more customized solution to these growing and increasingly important markets.

The question is, will the big bet pay off? And if so, how do you pull it off? Nick Stephens, chief executive of life sciences executive search firm RSA, explores what should be done differently as a leader in China to create an R&D site culture that incentivizes innovation and what attributes open the door to this burgeoning market.

From soup to scale

In the late 1990s, scores of multinationals were catching on to the cost-cutting benefits of sending work to China. Not pharma. The industry was bulging at the seams with profits and confidence. Whatever money could be saved by shifting R&D to the East would have seemed inconsequential compared with the billions of dollars at stake in the development of a new blockbuster. In fact, as recently as 2002, the Chinese pharmaceutical R&D landscape had still resembled a “primordial soup” - with lots of energy and potential, but very little in the way of organization or sophistication.

What a difference a decade makes. In the last 10years, driven by the need from multinational pharma companies for increased cost-effectiveness, this primordial soup has evolved - as is often the way - into a “higher order” entity. As such, in a relatively short space of time, we’ve gone from the early days of Western skepticism and disorganization, to the rapid expansion of contract research organization (CRO) outsourcing services, to way, way beyond, says Mr Stephens.