Stringent regulation in the key emerging markets (China, India, ASEAN) impacts the strategy of international companies. While the biggest players establish plants in these areas, most SME cannot and therefore opt for import of their drugs into Asia or cooperating with local partners.
Asia – except Japan and Korea – still remains mainly a generic-drug market, therefore IP litigation for patent breach/invalidation is on the rise, and is already affecting some of the biggest MNC. While India already has seen compulsory licensing of patented drugs to generic companies, China so far has not and may pursue in this way, as it aims to become a world leading country in pharmaceutical innovation. However, China de-facto does not guarantee data exclusivity.
Corruption (mainly in India and China) also becomes more and more an issue, especially for the US- and EU-listed companies which, risk heavy fines in their home jurisdiction and even reputation damage.
Despite the risks related to the level of IP protection, technology transfer is more and more chosen as the “affordable” way that SME can enter Asian markets. However, regulation – especially in China - determines which kind of technology can be imported and which cannot. Antibiotics, vitamins, vaccines, blood products still require partnership with local Chinese company. When partnering with and transferring technology to Chinese State-owned company, such technology can be considered state-assets, which means that re-exporting or re-transferring it to foreign entities may require governmental special authorizations.
R&D is also moving more to Asia, both as indigenous R&D and as international companies outsourcing R&D to local Asian CROs.
Pharmaceutical industry can be encouraged (biotech R&D, manufacturing), restricted (antibiotics, narcotics, vitamins, calcium, vaccines, blood products) or prohibited (stem cells, TCM, some diagnostics and therapeutics), according to specific activity and products
In order to get around restrictions for stem-cells, foreign companies may try to outsource to local CRO. If the service agreement gives too much control to foreign investors, this can be re-qualified as foreign investment into a forbidden industry.