On the whole, the medicine industry in Sichuan province is smaller in size; small-sized enterprises take up a huge portion, producing too many mimics; majority of the enterprises are weak in scientific and technological level, sluggish management capability and have lower production efficiency. To be more specific, the challenges and threats Sichuan medicine industry is faced with at present can be summarized into six points, as the following goes:
As China has entered the WTO, a mounting number of companies from abroad are flowing into China to invest for new businesses, certainly, Sichuan will also meet with more foreign companies than ever before. Multi-national corporations are coming with market-oriented operation of market-orientation, which is conducive to the standardization of drug market and the improvement of the centralization degree in drug market as well. However, the involvement of multi-national corporations will intensify the competition between different pharmacy companies at the same time.
The existing pharmacy companies in Sichuan province, confined by their immature scales, management level and technological skills, are hardly possible to contend with international pharmacy companies in the same field. Worse still, the current medicine enterprises develop in an unbalanced manner, for a great number of small-sized medicine enterprises are still struggling to survive. A noticeable segment of shares in the current pharmacy companies derived from private companies is a big problem, too. Although growing at a fast speed, private enterprises generally has lower productivity at an early stage, and more, they rely too heavily on individuals, instead of focusing on cooperation and team work, as a result, they cannot set up consolidated spirit. Therefore, in a bid to win in this fierce competition environment, medicine enterprises is bound to undergo a re-integration; but for investors, it could mean that they will have more opportunities to enter the drug market in Sichuan province.
1.2.2 Fragile in new medicine R&D
1) R&D in new Western medicines
R&D competence of China's medicine industry is weak generally. Chemical medicines produced in China lack independent intellectual property rights, and 97% of them are generic drugs, a situation putting China in a superior and unfavorable position. Likewise, the development of new medicines in Sichuan mainly aims at generic products, but the R&D competence in innovative medicines is unsatisfactory, showing slow reaction of conversion of new medicine results and moderate economic benefits.
2) R&D in new Chinese medicines The protection of TCM intellectual property rights is not done well enough in the world. Currently, administrative means (e.g. administrative rules and regulations, protection of new medicine types, etc.) is the primary way to protect the TCM intellectual property rights (IPR) in the home, while outside mainland China, because of the discrepancies between China and other countries or regions in cultural recognition and legal system, the protection of TCM intellectual property rights can be barely guaranteed. Some types, even if they have passed the stringent barrier of technical audit or managed to get through the overseas trade protection and accessed to the international drug mainstream market, they are unlikely to stand steadily in this market, since they are not prepared adequately with proper protective strategies and countermeasures. The slack protection of intellectual property rights will absolutely lead to insufficient competence in TCM R&D in China.
In another way, on the contrary, TCM R&D, as an irreversible development tendency of the medicine industry in following years, it also has a lot of opportunities though it is confronted with the barriers from IPR protection and the difficulty to enter international markets for the time being. The opportunities are the pioneer companies in TCM R&D are possible to spread their internal standards externally and convert them into the common standard in this industry, and more importantly, they will be able to participate in forging the game rules in TCM R&D, and eventually, they will occupy a vantage point in competition by guiding the development of the entire industry
1.2.3
TCM's entry into the international market shall be further enforced
Viewing that the rapidly mounting demand in TCM market, TCM products become a hit in China, so that companies are placing too much attention to the domestic market, while pushing the product export to a secondary position. Another reason is that, Sichuan province started to open up later than coastal areas, and the internationalization awareness among its enterprises is not keep up with those regions, either, as they do not highlight the international market in their booming program. What's more, the phenomenon of low-level duplicated construction in the export channels and organizations of the medicine industry is rampant in Sichuan province. Fortunately, Sichuan provincial government has already attached importance to the international marketing of medical products, and now is setting about constructing perfect supporting services and a service platform to encourage exports for enterprises as well.
However, although TCMs are recognized by more and more countries and regions in the globe, there are still a great deal of countries not expressing their positive attitude towards TCMs, and some countries, even worse, have enacted access barriers to TCM imports.Hence, TCMs have an arduous way to go ahead in order to enter the mainstream drug market.Even so, TCM shall not be considered the forbidden zone for trans-national investment,owing to the massive TCM consumption market composed of China and Chinese people living all over the world. Reviewing the success of R&D of Artemisinin in China,it is wise to forecast that the phyto medicines will be the first exports in the future,because they have already been used in developed countries.
And,investors can think about participating in mapping out the regulations in which TCMs will be taken as therapy medicines, and cooperating with Sichuan province¡ªthe important TCM base¡ªto get involved in the development trend of phyto medicines in the world harmoniously.
1.2.4
Advantages at all respects await to be re-arranged
At present, the advantages in resources, industry, scientific research and market are not integrated perfectly, so that they cannot function as a complete integration. This situation is mainly reflected by the facts that recourse advantages need to transfer to the competitive edges in medicine industry, that the interaction between industrial advantage and business advantage shall be strengthened, that the combination of scientific advantage and industrial advantage shall be further improved, and that links connecting the industrial chains shall be reinforced to a higher extent.
Only when investors make full use of local industrial and sector resources can they acquire the expected profits, develop in a long-run way, and have core competency. The medicine companies in Sichuan province have not integrated resources efficiently yet, and the conversion and combination of links connecting the industrial chains is still very preliminary, so it implies that more and better opportunities will fall upon new investors in the process of resource integration and industrial restructuring. For instance, Sichuan province has extracted more than 20 effective elements with clear molecule structures, many of which have been granted technological patents by developed countries, and preclinical study is fruitful and encouraging. If multi-national corporations are determined to take part in the joint R&D to produce the final product followed by industrialization production, they will be happy about the considerable benefits then.
1.2.5 Scattered raw material production with low-level industrialization
The technology and methods in TCM plantation are still backward, and family is the basic planting unit, which is usually without any planting standards nor any techniques or quality assurance, and often in a shabby scale. This planting manner can hardly meet the special requirements of TCM materials, directly resulting in the trouble with raw material purchase of processing enterprises, and the quality is not always good enough, plus some pesticide still remains, as a result, exports will be influenced attributed to the frustrating deep processing. At the same time, the scattered plantation raises the production costs without forming a certain scale, thus curbing the TCM industrialization and the extension of its industrial chains.
From another perspective, the scattered plantation will bring about low-degree in centralization of plantation industry, indicating that little barriers get in the way, and some company will find easy to enter the field of TCM plantation, if their competency permits. In practice, the way of ¡°companies plus farmers¡± is getting more and more welcome from investors, as it is an effective way for investors to tighten the centralization at this stage.
1.2.6 Inadequate in basic theoretic research, while testing means stagnant
The existing research organizations and companies impose more attention to the new medicine R&D, while weak in the critical technical research of TCM pharmacy and basic theoretic research. Prepared Chinese medicines have to be polished in terms of the effectiveness and safety, owing to the stagnant quality standard system, process specifications and other fundamental research work. Now, there is not a controlled quality standard from the raw materials to the final product, so that the efficacy, quality and safety of prepared Chinese medicines cannot be measured in quantity scientifically, and the medicine instruction excludes the statements about effective elements, toxic and side effects, or negative reactions. All in all, the final products cannot be ensured consistently. Presently, above 90 per cent out of over 100 TCMs that are proved to have toxicity are the research results from foreign research organizations, rather than domestic ones, and the consequence will be serious that TCMs may be limited to be imported by foreign countries.
Concerning hardware construction, the present research centers and laboratories are still far behind the internationally accepted GLP standard: not a single one complying with GLP, and a clinical trial base in line with GCP standard is also distant away. However, what is in shortage is what opportunities consist in. Investors could considering establishing a GLP/GCP laboratory in consistent with international standards in Sichuan province, serving other research organizations with a R&D platform; in the meantime, they could accomplish clinical study as quickly as possible by taking advantage of the large population in the province and via the standard operational way of CRO. If so, the investors can seize the valuable investing opportunities for their development.
