Bayer looking to strengthen R&D focus, innovation

Bayer Pharmaceuticals sees great potential in the Chinese market to foster innovation and digitalization, and has singled out China as one of its priorities, according to a top executive of the company.

Its president Stefan Oelrich said the company has a particular position of strength in China that is linked to its extensive history in the country, and is looking to further sustain and strengthen its position in the nation through strong innovation and digitalization.

"We have our research and development base in China. We hope to strengthen that in the future and to bet more on Chinese innovation," he said.

China's pharmaceutical demand has been booming in recent years due to the rapidly aging society with burgeoning purchasing power. It has become the world's second-largest market for pharmaceuticals, and the biggest emerging market with growth tipped to reach $145 billion to $175 billion by 2022, according to healthcare information company IQVIA.

The Chinese authorities have rolled out a series of policy reforms for drug registration, regulation, reimbursement, and public procurement process, with focus on innovation and homegrown research and development.

Experts said such a move aims at reconstructing and upgrading China's pharmaceutical market and will stimulate cooperation between domestic and foreign companies.

"China's pharmaceutical market has the greatest potential in the world, due to its tremendous population, even though it is now second to the United States," said Shi Lichen, founder of medical consultancy Beijing Dingchen Consultancy.

"Besides, opportunities arising from the restructuring of the market matter even more than the huge market size itself to multinational pharmaceutical firms eyeing the alluring market."

He explained that in the US, a typical mature pharmaceutical market, about 70 percent of the medicine expenditure paid by medical insurance are for original, innovative, or rare drugs, while in China about 80 percent of the payments from the public medical insurance funds are on generics, causing great financial burden to both patients and society.

That drives the authorities to reform related regulations and mechanisms to restructure the domestic market, with a focus on development and procurement of high-quality generics and novel drugs, which is creating room for further cooperation between domestic and foreign companies to explore new opportunities on R&D and marketing of high-quality generics and new drugs, he said.

Bayer Pharmaceuticals, the first to market in certain areas with advanced technologies, is increasingly envisaging to deepen its local cooperation with Chinese companies and Chinese academia, and also hopes to play a role in digital solutions for patients, an area China is very advanced with, according to Oelrich.

As Chinese digital giants, including big names such as Baidu, Tencent and Alibaba, have been betting on the healthcare industry in both consumer and business sectors, Oelrich said the combination of digital companies and traditional healthcare companies complements each other.

Digital companies have an advantage that the traditional players in healthcare may not have, coming from their use of big data technologies and smart algorithms that can connect across all sections of healthcare system, he said.

"Healthcare is very much structured in silos. You have the hospitals, you have other people that pay for it, and then you have the industry that provides medicines, devices, or solutions," he said.

Besides, as China is speeding up innovation in line with the Healthy China 2030 Initiative and improving patients' access to medicines and affordability, the company can bring innovations faster to Chinese patients, which means not only record-setting access for patients but also reimbursements that benefit the company, he said.

With deep roots in China's scientific community, the company also hopes to start exporting Chinese science to the rest of the world at some point, a new and upcoming trend in healthcare, he said.

Oelrich estimated China must have become the company's largest market in 2019 in terms of revenue, for the first time, despite the absence of any full-year data.

Bayer said its sales revenue in the Chinese mainland, Hong Kong special administration region and Taiwan province reached 3.13 billion euros ($3.47 billion) in 2018.