Between massive price cuts and increased innovation, the Chinese market is facing headwinds. In search of innovative organisations, it is shaking up the traditional pharmaceutical scheme, and could quickly foreshadow the future of pharma in the world.

By Fabien Nizon

China is now in the year of the Metal Buffalo. Embodying structure and responsibility, the animal imposes, according to Chinese mythology, a face-to-face encounter with reality. This is a reality that today presents the pharmaceutical industry with much more complex challenges than in the past. Most indicators are green, but they are offset by just as many challenges: sales of innovative drugs are expected to triple by 2025, reaching 960 billion yuan (122 billion euros), according to the IQVIA Institute, but pressure on prices is intensifying: up to -78% on new immunotherapies taken in charge since December. While access to medicines is improving, new purchasing processes and tighter standards are tending to concentrate supply, with the risk of new monopolies. Biotechs are benefiting from exceptional government support, but their transition to commercialisation may be hampered by the fact that buyers do not value their innovation very highly. Finally, despite the immensity of the market, laboratories are organising themselves into smaller, more agile teams to keep up with the frantic pace of reform, relying in particular on digital technology.

"A vibrant market"

"China is a vibrant and dynamic market, exhibiting the characteristics of both an emerging and fully developed economy," notes Pius S. Hornstein, Country Lead, Sanofi Greater China. "Its spectacular market, rapid innovation cycles, strong appetite for digital innovation and dynamic policy changes create both challenges and exciting opportunities." All experts agree that a deep understanding of China and its culture is necessary to keep up with trends and achieve the best results.

"In my experience as an international executive hunter, the most successful candidates are those who are not only interested in working in China, but also in learning about the country, its culture, its people and all other local aspects. Those who develop this interest will be more fulfilled in their work and will progress more in the long run," explains Beryl Chu, Client Partner at Pedersen & Partners Executive Search. Interest is necessary, but not sufficient. "There is a learning curve for any newcomer."

Pius S. Hornstein confirms this: "When I arrived in China in late 2018, I interacted with many people who had been established here for decades, but none of them expected healthcare reforms to be so deep and fast - with the standardisation of measures such as centralized drug procurement (Volume Based Procurement) and the acceleration of the National Reimbursement Drug List (NRDL) update." [...]

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"Foreign talents must be 'localised' in Chinese customs"

Beryl Chu is a Client Partner at Pedersen & Partners Executive Search, located in Shanghai since 2003. As an expert of the Chinese pharmaceutical market and the interaction between local and expatriate talent pools, she details the major trends in the recruitment market.

What are the main areas of talent recruitment in China?

The demands cover a wide spectrum, but the recruitment needs of multinational companies differ from those of Chinese companies. Chinese companies have a constant need to recruit in sales and marketing functions. Conversely, international laboratories which have set up R&D centres in China are intensifying their recruitment in R&D, medical affairs and product marketing. Licensing is also booming, on both the demand and supply sides. In addition, there is a growing need for experts in the field of digitalisation. Covid has stimulated the creation of biotech companies, and at the same time the development of the digital health segment.

Is the pool of qualified candidates growing as fast as the needs of industry?

Yes. Over the past decade, the number of local Chinese candidates trained by multinational companies or abroad has exploded. China is an attractive job market – not only for Chinese candidates, but also for expatriates – because of its rapid growth. In addition to Chinese candidates, the talent pool includes Chinese expatriates returning from abroad, and Europeans and Americans who are looking for new opportunities.

Have the pandemic and border closures slowed talent recruitment?

No. Companies are finding a large local pool of talent, and are no longer dependent on foreign executives. In fact, companies are primarily looking for Chinese executives to run their businesses, even subsidiaries of international laboratories. The Chinese market is complex compared to Western markets, due to deep cultural and linguistic differences; if foreign talent is not “localised” in Chinese customs, they will find it difficult to survive. The local technology conglomerate BAT (Baidu, Alibaba and Tencent) is now a major source of excellent qualified candidates.

As the coronavirus pandemic starts to level off and the world prepares to return to the new normal, China’s pharmaceutical industry, including Biopharmaceuticals, Vaccines, Biotech, and Generics is becoming one of the most dynamic sectors in the global economy. The combination of favourable regulatory conditions, a huge population underserved by traditional western medicine, and a burgeoning economy have led to massive investment.

The pharmaceutical industry in China saw an 11% increase in annual growth in 2017, about four times the EU rate, and three times more than most Western European countries. Furthermore, a 2018 report from Ernst & Young predicted 14% growth every year between 2017 and 2020. The Chinese market is primed to continue its robust demand-driven growth, with 60% of China’s population living in cities by 2020, rising rates of chronic and lifestyle diseases such as cancer and hypertension, and increased acceptance of western medicines.

This growth has led to a spike in demand for pharmaceutical executives to manage this expansion. The sector demands experienced and erudite executives capable of steering and managing complex issues, including massive investments, accelerated development, and meticulous approval processes. Domestically-educated and internationally-educated Chinese executives are sought after and headhunted to meet these requirements, as are Overseas Chinese executives responding to heightened demand.

The Chinese government has stimulated growth in the industry by streamlining regulations and cutting red tape. It has set the following ambitious goals:

• Generic drugs will be modelled for about 90% of proprietary drugs as the patents expire;
• 100 Chinese pharmaceutical companies will earn export licenses from leading markets around the world;
• 5-10 new Chinese medicines will have FDA or EMA intellectual property rights by 2020;
• 20-30 innovative drugs will be industrialised by 2025.

Moreover, global pharma companies have flocked to China in order to capitalise on such a large and rapidly-expanding market. Official statistics from 2017 show foreign investments into Chinese high-tech industries surging 61.7% in 2017, to make up 28.6% of the total. Furthermore, foreign investments into medical treatment instruments and meter manufacturing soared by 28% annually. Multinational companies have often engaged with local partners to streamline processes and acquire market and clinical access that would be difficult to build from scratch, and global players have established joint ventures with local companies to tap into local market knowledge.

Investments have also been facilitated by changes to financial regulations, with the Hong Kong Stock Exchange changing its listing rules to attract more biotech companies. This has facilitated the financing and expansion of local companies, with Innovent Biologics, Hua Medicine, and Ascletis Pharma all benefitting from listing on the Hong Kong Stock Exchange.

As the industry rapidly expands, two areas in particular have seen a massive increase in talent demand. Marketing is a crucial aspect for pharmaceutical companies, and specialised talent is needed to seek out current and former physicians who can coach doctors about how their patients can benefit from new drugs. The job description requires rigorous knowledge of the medicinal benefits of individual drugs, a good understanding of local regulations, and people skills. Locally-based Chinese executives with strong knowledge of customers, procedures, specific requirements, and other factors (such as government links) are particularly attractive to clients and search consultants.

Research and development is another area seeing a huge demand for talent. Previously, the local market concentrated on producing generics rather than the development of new compounds and medicines, as these require a long period of time to provide return on investment. Due to a somewhat less amicable relationship with the US, China is now pivoting to develop its own medicines, and aggressively ramping up research and development.

The pool of qualified candidates for these positions comes from a number of sources. Domestic Chinese firms can tap the broadest talent pool, employing home-grown talent without foreign language skills, as well as seeking those groomed abroad. Moreover, some Chinese companies have established subsidiaries in the US, which allows access to American experts as well.

Global companies are not as fortunate in this respect. They need to find candidates with foreign language skills, and they tend to prefer those with international experience as well. This makes the competition for talent in China especially fierce, which is then exacerbated by the drain of locals with language skills and international experience, as they seek lucrative positions in global pharmaceutical companies abroad.

While the Chinese pharmaceutical sector is poised to continue its dynamic growth, there are some clouds on the horizon, not least of which is the COVID-19 pandemic. The outbreak has already created supply chain disruptions within China, and even as the world slowly starts to come back to normal, the threat of a second wave of infection looms in the future. Even if no second wave develops, it will be impossible to escape the general global economic uncertainty that has spread along with the contagion. Although there are serious concerns, the outlook for the sector is still exceptionally bright.

Individuals with the right skills stand to see great opportunities, and recruiters will continue to see an exceptional level of competition in the search for the highest-calibre candidates.

Life Sciences & Healthcare Practice Group