Applying “Innovation Arbitrage” to Develop Novel Medicines in China


Xconomy San Diego — 

[Editor’s Note: This post was co-authored by Jessica Yingling of Little Dog Communications.]

Loosely defined, arbitrage is striking a combination of matching deals that capitalize upon an imbalance. Profit is gained from the difference between the market prices. With the Chinese government focusing on innovation through forward-looking national agendas for economic development, the opportunity to apply an “innovation arbitrage” is emerging as an important means to develop novel medicines in China.

Historically, the potential value of developing a new therapeutic in China was discounted heavily by the potential risk that the therapy would not be used. Chinese healthcare has relied heavily on traditional Chinese medicinal remedies, and the less established intellectual property enforcement did not protect against domestic competition.

Major advancements supported by the government in China have countered these two hurdles.

The China Food and Drug Administration (formerly the State Food and Drug Administration) was reorganized earlier this year to elevate the agency and further streamline regulatory processes. In 2009, Chinese regulators implemented a “green channel” to speed the agency’s review and communications for novel treatments and drugs. Since then, more than thirty products have been approved through this process. The CFDA also has put in place mechanisms to identify potential patent infringement prior to approval and market entry.

Furthermore, in China’s most recent five-year plan (outlined in March 2011), the government set forth to develop seven emerging industries, including biotechnology, for the country’s long-term social and economic development. As the largest healthcare payer in the world, China has seen the need to make significant government investments in biotech and healthcare innovation.

The World Property Office has reported that Chinese patent filings in general have increased 200 percent since 2007. Yet China continues to show an almost singular focus on … Next Page »

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