Is China’s Old Pharma Too Complex to Simplify?
China has long promoted its traditional medicinal system as a national treasure and more recently as a tool of soft power. While the ancient art remains a policy priority, however, it faces very modern challenges including rising costs, complexities of production and treatment, and murky intellectual property rights.
Chinese medicine practitioners have been treating patients with herbal medicine and acupuncture around the globe, from the Czech Republic to South Sudan. In China, half the items covered by public health insurance come from the traditional canon. Such products account for more than 40% of the $280 billion pharmaceutical market, the second largest in the world.
The Nobel prize awarded in 2015 to Tu Youyou for deriving an anti-malarial drug from sweet wormwood marked a high-point for Chinese traditional medicine, a sense that it was being given the recognition it deserved.
Yet there’s a sense of pessimism. Chemical drug makers, such as Jiangsu Hengrui Medicine Co., have shaken off the blow of forced price cuts imposed last year. Meanwhile, the biggest traditional medicine makers, such as Guangzhou Baiyunshan Pharmaceutical Holdings Co Ltd. and Zhangzhou Pientzehuang Pharmaceutical Co., are languishing.
One problem is intellectual property. In its bid for technological supremacy, China has become obsessed with how many patents Huawei Technologies Co. can claim or how many clinical trials are held for cancer immunotherapy. Mundane products are more neglected.
Take the 1,000-odd traditional medicines on the latest National Drug Reimbursement List, released in late August. At first glance, this looks like a boost for makers. But the fine print shows Beijing’s unwillingness to spend much on traditional therapies. For instance, most of the traditional medicines in injectable form can only be given at large public hospitals. Such facilities only rarely have traditional doctors, who are the only ones allowed to administer such treatment.
This is partly because Beijing is poorer than believed. As I’ve written, in China, healthcare costs are mainly covered by state medical insurance and by patients themselves. Without government subsidies, China’s 2.3 trillion yuan ($322 billion) social insurance fund would have been in deficit years ago. In 2018, subsidies accounted for a quarter of total revenue.
Efficiency is an important metric as Beijing grapples with a rapidly aging population. The government would rather prioritize medicines that show immediate effect. Traditional Chinese medicine takes time and emphasizes disease prevention and recovery. Many products claim to cure multiple ailments, such as Pientzehuang’s flagship product, a centuries-old concoction. How effective are they? It can be hard to measure.
Then there is finding a proper doctor. For every four graduates of a Western-style medical school, only one completes a traditional medicine education. One way for producers to adapt is to derive their products into Western chemical forms, like Tu Youyou did with sweet wormwood. That way, every doctor at a hospital can prescribe the pill.
But that’s a tall order. Traditional medicine is not known for simplicity, making it difficult to adapt a treatment to a simple pill or two, taken all at once.
Case in point: I go to my traditional doctor sometimes to treat “internal heat imbalance” from work stress and excessive yoga. The prescription contains at least a dozen ingredients, from tree bark to dried lily buds, and effectively ignores the notion of allergies. Imagine pushing these ingredients through the equivalent of the U.S. Food and Drug Administration.
As for patients, while they can read up on Western drugs or even medicate themselves with cheap generics, traditional medicine is well beyond quick understanding. Ayurveda, a system of medicine that originated in India, treats patients on a fairly simple foundation of three elements. Traditional Chinese medicine is deeply complex and resists change.
Short on money, Beijing no longer has the patience for complexity.
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Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron’s, following a career as an investment banker, and is a CFA charterholder.
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