Novartis’ Shanghai R&D facility, a $1 billion research center that has been in the works since 2009, officially opened its doors this week. Novartis also has two other R&D centers, which are located in Cambridge, Mass., and Basel, Switzerland.
Ten years ago, many companies were drawn to China on account of lower salaries among their scientists. Today, however, companies are tasked with a challenge in the Chinese pharmaceutical market: government pressure on drug prices.
According to an article in the Asset magazine, “[i]n China, prescriptions drugs drive around 40% of total healthcare spending compared to 15% in the U.S., so the government has preferred generics to cut costs.”
Keep in mind that this is in addition to scandals, such as GSK’s bribery case, and regulatory hurdles, like slow registration processes for new drugs.
Despite these apparent challenges, Novartis CEO, Joe Jimenez, “is keen to look past recent troubles for the industry in the region, saying that there has ‘been an explosion of talent in China,’” according to a report in Fierce Biotech. This declaration comes soon after monumental changes within the company, as Novartis recently split its drug division in two: Novartis Oncology and Novartis Pharmaceuticals.
“The Chinese historically have not been proven innovators in certain areas [drug discovery],” Jimenez told Fortune. “If you look at what’s happening now, it’s changing. I think partly because of the flood of new technologies that are emerging, and companies like Novartis that are training Chinese scientists in the way that we discover drugs.”
According to an interview Jimenez had with Fortune, the company is currently spending about $200 billion each year on research and development, which is second only to the U.S.
“Single-digit growth is going to be the new normal in China,” Jimenez said. “We had consistently seen 11% or 12% growth five or six years ago. The economic slowdown has led to a slowing because a lot of pharmaceuticals in China are still paid out-of-pocket. But we’re saying look, when you compare to U.S.’s 1% to 2% growth or Europe’s 1%, it’s pretty good.”
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Filed Under: Drug Discovery
