Recent headlines might suggest that this is an inauspicious time for foreign drug companies to be pouring R&D money into China. The nation has endured a wave of bad press for producing lead-tainted toys and exporting toxic pet food. Last July, the head of the State Food and Drug Administration was executed for accepting hundreds of thousands of dollars in bribes.

 

Yet in just the past 18 months, AstraZeneca, Novartis, and GlaxoSmithKline have launched plans to invest hundreds of millions of dollars in mainland labs, joining the likes of Pfizer and Roche. Some drug makers plan for their China R&D centers to develop into key sites for global research. Others, such as Eli Lilly, are forging high-end collaborations with local research firms.

 

That’s not to minimize the regulatory hassles that still beset pharmaceutical businesses in China, or to downplay the worries of protecting intellectual property (IP) from unsavory local firms that produce copycat drugs. Yet in the past few years, mainland-based R&D has taken on an increasingly sophisticated cast, abetted by an influx of Chinese Ph.D. scientists returning from overseas work and study. Back at home they’re boosting overall research standards. Many have taken up leading roles in the multinational push into R&D, while others are helping to build out local contract research organizations (CROs).

 

“I think on a larger scale, our research collaborations in China have really expanded over the past two or three years, both as the CRO industry has become more mature in China and parts of Asia and as companies face internal R&D productivity challenges,” says Steve Yang, head of research, Asia, for Pfizer. “We’re exploring ways to shift some of our R&D work, both to improve productivity and to tap into the talent base in Asia.”

 

The push into China is in part a response to the spiraling cost of drug discovery, which can reach $1 billion by the time a medication is approved. Conducting discovery chemistry work on the Chinese mainland costs around one-quarter to one-third the price of similar work in Western countries.

 

“We see Asia as an opportunity to try to experiment with different ways to do drug discovery,” says Guoxin Zhu, head of China chemistry for Eli Lilly Asia. “We’re not necessarily looking for lower labor costs. The problem is so many compounds fail before they go to market.”

 

Indeed, for every 5,000 to 10,000 screened compounds, only five enter human clinical trials and just one is likely to be approved by the U.S. Food and Drug Administration, according to the Washington, D.C.-based Pharmaceutical Research and Manufacturers of America (PhRMA). By dispatching R&D work to China, drug makers based in the United States or Europe can boost efficiency by ensuring that work continues globally, around the clock.