Big Pharma companies have often talked about the major opportunities that await in China. But as price cuts play out and internal priorities shift, multinational companies are reworking their business models in the country.
In the last few months of 2023, Pfizer, GSK, Sanofi and Biogen have each tapped local partners to help commercialize their products in China. With marketing responsibilities shifting to other firms, job cuts were expected at each of those large drugmakers.
It’s not a new approach for foreign drugmakers to tap local partners in China, Justin Wang, head of L.E.K. Consulting’s China practice, pointed out in an email interview with Fierce Pharma. But these deals are on the rise lately, Wang explained, partly because “there is increasing pricing and competitive pressure in the market, especially for mature products, leaving reduced [return on investment] for in-house commercial resources.”
Pfizer in November unveiled a deal with Keyuan Pharma, granting the Shanghai Pharma subsidiary exclusive rights to distribute and promote its pneumococcal vaccine Prevenar 13 (known as Prevnar 13 in the U.S.) in China.
“We believe that this partnership will leverage the synergies of both companies and make Prevenar 13 available to a much broader population in China,” a Pfizer spokesperson told Fierce Pharma.
Pfizer’s announcement came about a month after GSK signed on Chongqing Zhifei Biological Products to distribute its shingles vaccine, Shingrix, in China. Zhifei made a name as the marketer of Merck’s HPV shot Gardasil in China. Thanks to Gardasil’s impressive growth in the country, Merck earlier this year surpassed AstraZeneca as China’s largest foreign pharma company by sales. Before AZ, that title belonged to Pfizer.
Local companies have strong track records from prior Big Pharma partnerships, Wang noted, so that’s another reason why the deals are gaining in popularity in recent months. With the two new collaborations, three of the world’s top-selling vaccines are now all handled by local firms in China.
The vaccine commercialization model is different in China than in the U.S. As local Chinese CDC agencies serve as direct customers of the immunizations, vaccines have no commercial synergies with other drugs, Wang explained.
Chinese regulators divide vaccines into two types: mandatory and voluntary. Gardasil, Prevnar and Shingrix all belong to the Class 2 voluntary group. The Class 2 vaccines require heavy investment and intensive market education, which can be burdensome for foreign pharma companies. Zhifei, for example, has assembled a commercial team of more than 3,000 people, he noted.
Pfizer’s existing Prevenar China team—reportedly 400 people strong—is being disbanded, according to local reports. Pfizer’s spokesperson declined to comment on the number of jobs affected by the Keyuan deal.
The move comes as Pfizer cuts costs around the globe to save $4 billion annually by the end of 2024 in response to declining COVID product sales. The company’s spokesperson said the Keyuan partnership is “independent of any other company initiative or business decision.”
It’s not just vaccines
At GSK, it appears the company is further restructuring its China business beyond the Shingrix pact. According to local reports from a few days ago, the British drugmaker is outsourcing commercialization of two older meds, the COPD inhaler Anoro and the anti-epileptic Lamictal.
Sales staffers supporting those drugs are also expected to be let go, according to the reports. GSK declined to comment on this subject.
Beyond Pfizer and GSK, Biogen has established a strategic partnership with a local company for its multiple sclerosis portfolio in China, a company spokesperson confirmed with Fierce Pharma. Biogen sells MS drugs Fampyra and Tecfidera in the country.
Similar to Pfizer, Biogen is also undergoing a companywide cost-cutting initiative, which aims to reduce its workforce by 1,000 and save $1 billion in operating expenses by 2025.
Almost simultaneous to the Biogen accord, Sanofi China unveiled a “broad and deep” collaboration with Shanghai Pharma. The two companies will partner on treatments for cardiovascular diseases, central nervous system disorders and cancer so that Sanofi can build a business model that “better fits the local market and optimizes operations,” the French pharma said in a Dec. 14 release published on its official WeChat account.
Sanofi wouldn’t comment on the exact products involved. Local reports said the company is delegating marketing responsibilities around MS drug Aubagio, the thrombosis med Clexane (also known as Lovenox), anti-serum phosphorus therapy Renvela, as well as chemotherapies oxaliplatin and docetaxel.
“To support the execution of our strategy, we are looking at adjusting our organization setup and optimizing our commercial presence, identifying partners capable of ensuring the sustainable distribution of our portfolio of medicines for patients,” a Sanofi spokesperson told Fierce Pharma.
As part of its third-quarter earnings, Sanofi launched an initiative to save up to 2 billion euros from 2024 to the end of 2025. The company’s recent corporate update led to a rare, 20% price drop in Sanofi’s stock.
In striking the deals, both Sanofi and Biogen have opted not to pursue selling MS meds on their own in the country. That’s despite Biogen winning national coverage for Tecfidera.
MS is a rare disease in China with a very low diagnosis rate, making it a tough market, L.E.K.’s Wang noted.
“Rare disease drugs are not easy for any pharma to manage in China,” Wang said. “You need to establish the diagnosis and treatment protocols and referral networks to find the right patients.”
Commercial trade-offs
Meanwhile, China’s National Reimbursement Drug List (NRDL) poses a sticking point for some products because it does not allow the high prices for rare disease medicines that are seen in the U.S. Therefore, market access remains a challenge for medicines with high prices, Wang added.
The NRDL represents a trade-off between sharp discounts and a large patient base, and calculations around revenue, profitability and commercial investment determine whether a drug is better off staying outside of the program, Wang said.
Even after winning national coverage, drugs aren’t guaranteed commercial success under NRDL. While national insurance opens up broader market access, “you still need efforts to be listed in each hospital’s formulary, educate physicians, and ensure reimbursement implementation in local jurisdictions,” Wang noted.
Therefore, a company typically needs to ramp up marketing investment to be able to reap the benefits of NRDL.
Lately, many Western pharma companies have decided not to pursue NRDL coverage for some of their drugs. None of the major PD-1/L1 inhibitors are currently on the NRDL, and foreign pharmas’ antibody-drug conjugates (ADCs), including AZ and Daiichi Sankyo’s Enhertu and Gilead Sciences’ Trodelvy, also didn’t make the cut.
Besides the NRDL, China’s volume-based procurement (VBP) program is designed to cut prices for older off-patent meds. Foreign pharmas have formed several local partnerships for mature products that need deeper “coverage” than market education, Wang noted. These deals also depend on the pharma company’s interest to explore “lower-tier” markets outside the major cities, he said.
Various forms of engagement
Financial trade-offs appear to be the most important factor accelerating the trend of Big Pharma companies reducing their marketing responsibilities in China, Wang said. But geopolitical risk is “certainly something influencing decision-making—especially at the HQs.”
The volatile political environment means some smaller drugmakers may be hesitant to go big on China, but large pharmas are still committed to investing in China in various forms, Wang noted.
For example, as part of GSK’s reshuffling in China, the company set a goal to become a top 10 foreign pharma in China by 2030. The U.K. drugmaker recently also in-licensed two ADCs from Chinese biotech Hansoh Pharmaceutical.
“You can find molecules in China and [often] the Chinese companies just want the [domestic] rights so you can negotiate … [to] take it globally,” GSK’s chief commercial officer, Luke Miels, recently told The Financial Times
“A key theme we see is that [Big Pharma companies] are actively optimizing their commercial models,” L.E.K.’s Wang observes, “on the one hand exploring various forms of partnerships to access external resources, and on the other hand increasing in-house team efficiencies through new digital/omnichannel customer engagement models.”