Artemisinin’s Rocky Road to Globalization: Part III

In the previous blog post, I discussed how China’s efforts to promote its artemisinin-based drugs in the global market have ended up placing their pharmaceutical firms at the lower end of the supply chain. Not all Chinese pharmaceutical companies were content with this arrangement. In 1994, Beijing Holley-Cotec became the first Chinese manufacturer to export dihydroartemisinin (“Cotecxin”), one of the artemisinin derivatives that the company developed with an original Chinese brand.

The government supported Chinese pharmaceutical firms’ globalization efforts. In 1996, the Ministry of Health designated Cotecxin as a required medicine for Chinese medical teams in Africa. Indeed, Chinese leaders who visited Africa often brought Cotecxin as a state gift. In 1999, China formally launched the strategy of encouraging its companies to “walk out” and “go global.” Two years later, a state-sponsored expert panel set the objective of expanding the market share of Chinese-made anti-malarial drugs from 0.5 percent to 35-40 percent in ten years. The globalization strategy was facilitated by other Chinese health aid practice, such as the building of hospitals and anti-malarial clinics in Africa. In November 2006, China pledged to build thirty hospitals and provide $37.5 million in grants to supply artemisinin and build thirty anti-malarial centers in Africa. In 2009, it further pledged to provide medical equipment and anti-malarial drugs worth $79 million to the hospitals and anti-malarial centers built by China. Holley-Cotec, in particular, contributed a third of China’s overseas anti-malarial drug donations. Donating anti-malarials helps the drugs gain better brand recognition in the market, and is believed to be a low-cost and potentially effective way to introduce Chinese-made artemisinin-based combination therapies (ACTs) to Africa, where demand for anti-malarials is high but domestic purchasing power remains low.

Since 2007, China’s pharmaceutical firms have become more aggressive in promoting their domestically developed anti-malarial products globally. By setting up subsidiaries and local distribution channels, major Chinese ACT manufacturers such as Guilin Pharmaceutical, Kunming Pharmaceutical (KPC), and Beijing Holley-Cotec have all sought to break into the African market, the single biggest market for anti-malarial drug makers.

In August 2007, Guilin Pharmaceutical became the first Chinese firm to have its own ACT (Artesunate + Amodiaquine tablets) prequalified by the WHO, which paved way for the product to be procured by U.N. agencies. Five years later, another ACT product from Guilin received prequalification from the WHO. By then, the company had reportedly supplied over three hundred million treatments of oral ACTs worldwide. Other Chinese pharmaceutical firms continue to strive to have their ACT products WHO prequalified. They include Beijing Holley-Cotec’s Cotecxin, KPC’s ARCO, and Artepharm’s Artequick. In 2014, Artepharm, a Guangzhou-based pharmaceutical firm, completed a massive, controversial trial in which its new product Artequick was administered for free on more than seven-hundred thousand people in the Comoros. Aiming to market the drug throughout Africa, the company cited the experiment as proof of the drug’s effectiveness. The same year, KPC acquired Beijing Holley-Cotec, becoming the largest anti-malarial active pharmaceutical ingredient (API) manufacturer in the world.

These efforts appear to be paying off. By 2014, for example, Cotecxin reportedly ranked among the top two anti-malarial drugs in terms of market share in East Africa and West Africa. But so far they have not led to significant expansion of China’s market share in the global anti-malarial market. It remains the case today that all but one Chinese anti-malarial producer are unable to supply to the public sector in Africa because their products are not WHO prequalified. Doctors in Africa still prefer to prescribe Coartem over Chinese made anti-malarials. Furthermore, Chinese made ACTs today no longer have a competitive price. In 2006, Novartis reduced the public sector price of Coartem to $1/person. In 2008, it was further reduced to $0.80.

Unable to challenge the dominant status of multinational pharmaceuticals in the public sector, which accounts for about 80 percent of the market, Chinese ACT producers turned to the private sector. Chinese ACT producers focused on markets where most individuals do not have access to public health services and therefore buy anti-malarials from private outlets such as local market stalls and drug stores. But even in this sector they face many challenges. The entry of a large number of unqualified API manufacturers during the 2004-2006 artemisinin bubble was associated with the exports of large amounts of fake and substandard drugs. The suspicion that Chinese companies are a source of counterfeit anti-malarial products has held back China’s ambitions in the private sector in Africa. Moreover, China’s products have been met with fierce competition from multinational pharmaceuticals (e.g., Novartis, Sanofi) and emerging economies (e.g., India). In 2010, Novartis launched a program to expand its share of ACTs in the private sector, which involves selling ACTs at a low price, creating a sustainable business model not subject to donor funding, and teaching private suppliers and patients how to properly use the medicines. Later, it used novel distribution channels such as the Affordable Medicines Facility – malaria (AMFm) to improve access to ACTs by those people relying on the private sector. It also joined forces with the Roll Back Malaria partnership, the Global Fund, private sector and government agencies to launch the SMS for Life project, which uses mobile phones and SMS messaging to track weekly stock of anti-malarials in rural health facilities. In 2013, the new Novartis ACT that reduces the treatment course from twenty-four tablets to six was launched in Nigeria’s private market.

Meanwhile, China’s status as the most important API supplier should not be taken for granted. After the 2004-2006 artemisinin bubble, the risk of disruption in the API supply chain led Novartis to turn to API suppliers beyond China. Today, East Africa accounts for 20 percent of the raw plant material used for extracting artemisinin. Alternative extraction methods such as synthesizing artemisinin in a lab setting—as opposed to isolating it from botanical source—have been developed. In August 2014, Sanofi and its partner announced the delivery of the first large-scale batches of anti-malarial treatments manufactured with a new semisynthetic artemisinin derivative to malaria-ridden African countries. The shift to a new API manufacturing process undermines China’s status (and leverage) as a global leader in supplying APIs.

To sum up, China has come a long way in developing and promoting its own artemisinin-based products, but there is still a long way to go before it is able to seriously challenge the status quo in the international anti-malarial market.