Ren Zegang, Cathy Zhao

Recently the Customs of Changchun city, Jilin province in north-eastern China, solved a case of smuggling medicine from India worth of 13 million yuan. It was alleged that five online shopping agents had been smuggling dozens of types of generic drugs from India through ecommerce networks.

Generic drug refers to a copy of origin or Reference Listed Drug in dose, safety, strength, quality, performance and intended use. When a patent medicine is expired, manufactures in other countries will be able to produce generic medicines.

However in India, generic drugs are permitted to be produced when such drugs are still under patent protection. Indian’s law defines that local manufacturers are able to produce generic drugs when their supply can not meet public demand due to various factors such as high prices.  Export of such generic medicine is also permitted to the countries where reproducing capabilities at low cost do not exist.

Indian generic drugs are highly sought after in China among cancer patients thanks to their relatively low prices but good equality. Such Indian generic drugs are mainly imported illegally through on line ecommerce networks, a practice banned in China but very difficult for the government to control.

In an effort to deter such illegal importation, the Chinese authority issued public notifications nine times pointing 122 on-line shoppers for their involvement in drug smuggling in a period from November 2010 to the beginning of 2015. In Shanghai alone, six cases of smuggling medicines from India through on line sale-shipment networks have been sentenced since 2013. Many online shoppers have been penalized at various degrees.

However in the eyes of patients and their families the ban imposed by the government is irrational as it leaves patients with no option but to take those very expensive original medicines. Lu Yong’s case, the most notorious one on illegal importation of generic drugs from India, reflects the public emotion and difficult position of the government.

Lu Yong lives in Wu Xi, Jiangsu province who was diagnosed with leukemia in 2002.  He has been treated with Glivec, an anti-cancer medicine produced by Swiss Norwartis with retailing price ranging from 23000 to 25000 yuan per box in China (US$3374 to 3667). Then he started to take the generic medicine of Glivec made in India. Having  convinced that the generic medicine is as good as the origin, he started to help other leukemia patients to purchase Indian generic drugs which are highly value for money through ecommerce networks.

On 21st of July, 2014, he was sued for abuse of credit cards and selling fake medicine by Yuanjiang Procuratorate, Hunan province. However, 493 leukaemia patients jointly signed a petition pleading the authority for Lu’s exemption from any penalties.

It is obvious that the huge demand has served as a foundation to the smuggling of medicine from India to China. The crucial fact behind is the poor development of the Chinese pharmaceutical industry, in particularly the production of generic drugs.

India’s position as a “World Pharmaceutical Manufacturer” has been widely acknowledged. India exports medicines to over 200 countries and vaccines and bio-pharmaceutical products to150 countries. India shares 20% of the total genetic drugs produced worldwide. 60% of the generic drugs made in India are for developed countries including America, European countries and Japan. There are 119 pharmaceutical factories in India that have been approved by FDA for the export of around 900 medicines and pharmaceutical products to America. Nearly 40% of the generic drugs in the US come from India. There are over 80 pharmaceutical factories in India gained certification of British Bureau of Medicine Administration for export.

Those FAD approved pharmaceutical factories in India have a cost structure 65% lower than their US counterparts and 50% lower than their European counterparts. Therefore Indian pharmaceutical manufacturers are likely to win outsourcing contracts. In return the growth in the export has contributed to expansion of those companies as well as their innovation.

In the contrast the supervision and administration on drug production in China lags far behind international standard. The generic drugs made in China are far less reliable. Quoted in a newspaper report, an insider admitted that “there are too many pharmaceutical factories produce same type of generic drug but with high inconsistence between the products. Side effects such as allergy are common. Doctors in China’s well-known hospitals are likely to recommend imported medicine to patients who concerned more about the effect of the treatment than the price of the medicine.”

Therefore, the Chinese pharmaceutical industry urgently needs to speed up its development in the generic drug production.

Aiming at easing the problem the department under China’s State Council is formulating a road-map for the reforms in the Chinese pharmaceutical industry by coming October. The priority will be the establishment of a consistent and authoritative system on the evaluation of the quality and performance of existing generic drugs. The result of such evaluation should be made to public. A public notification will be prepared listing all the domestic genetic drugs capable of substituting the original medicine. Then the government regulators will direct purchases of generic drug primarily to those companies successfully passing the evaluation.

In such a way, on one hand consumers in China can be assured with availability of some domestic generic medicines that works. On the other hand, it will promote concentration of the Chinese pharmaceutical industry.

China should learn from India in the establishment of a strict standard of evaluation. Adoption of international standard will be the first step to push the Chines pharmaceutical companies lifting their performance ranging from sourcing raw material, production control and management.