To Win China's Market, Overseas Drugmakers Are Encouraged to Make in China

Shanghai is speeding up access to innovative drugs and pushing overseas pharmaceutical companies to invest in local manufacturing as competition among Chinese biotech hubs heats up.

Senior regulators introduced a package of reforms on Wednesday that reduce clinical clearance timelines, speed hospital adoption, and remove long-standing procedural roadblocks for multinational drugmakers wanting to transfer production to China.

The goal is simple: foreign pharmaceutical companies must produce in China to win, not only sell to it.

Innovation Drugs: Approval Is No Longer Enough

Shanghai's health authorities want hospitals to adopt innovative therapies more quickly to bridge the regulatory approval-to-clinical use gap, which is often cited as a reason for the bottleneck to access the Chinese market.

"Patients care less about registration numbers and far more about whether these drugs reach hospital wards," said Shanghai Municipal Health Commission Pharmaceutical Administration Division Director Ni Yuanfeng. "We are telling hospitals: new drugs must be allocated and used, not stalled under budget caps or catalog excuses."

New rules require hospitals to convene formulary committees within one month of each revised national or municipal drug catalog and include qualified innovative therapies on a "should-be-supplied" basis.

Shanghai has enabled three-year standalone budget windows for new medications to reduce financial pressure and protect hospitals from drug-spending ratio fines, which historically inhibited adoption.

Officials say results are visible. Internal assessments during the briefing showed that Shanghai's innovation medicine deployment rate was 18.9 percent, more than double that of the second-place city nationwide.

Ni said China's most innovation-friendly market is Shanghai.

The municipality is also working upstream to standardize ethics review and streamline clinical trial approvals. Innovative drug trials can now be approved in 30 days, and life-saving medications for critical illnesses can enter hospital pathways in 15 days.

For Multinationals, Selling is No Longer Enough

Shanghai officials offered unusually frank commentary on why the city is rewriting rules for imported products transitioning to local production.

"Multinational companies do not expand through organic growth; they expand through acquisition," said Guo Shuting, Deputy Director of the Shanghai Municipal Drug Administration.

"When a mature device or therapy already exists in a global product line, our question is simple: why shouldn't it be produced here?"

China's national regulator, in 2024, opened priority approval channels for originator drugs transferring manufacturing to China while preserving their originator status, avoiding the reclassification risk that haunted multinationals for years.

On the device side, a 2020 rule only allowed product certificates to be reused if the Chinese entity was a formal subsidiary. The 2025 "30-Article Announcement" broadened eligibility to include any organization under the same ultimate controlling shareholder following lobbying from Shanghai.

For groups built through serial M&A, this shift is decisive.

Guo acknowledged the bottleneck. "These are not laboratory toys. They are often made by companies that have bought five different firms over ten years," he said. "We should not ask them to rerun the entire regulatory gauntlet just because a product's parent company has changed."

To calm concerns over intellectual property leakage, a common fear among foreign headquarters, Shanghai regulators have codified what inspectors may and may not review, including clear boundaries on software codes and proprietary manufacturing steps.

For high-value products, the city promises batch project response windows as short as one week, an implicit invitation to relocate multiple SKUs at once.

Industrial Gravity: Choosing What China Gets

Shanghai officials insist they are not competing for low-margin fill-and-finish contracts.

"We do not encourage the relocation of outdated or secondary-tier products," Guo said. "We want high-value therapies and high-end devices, those with real clinical impact and real technology content."

Shanghai's manufacturing map now features the Da Vinci surgical robot in Pudong, Medtronic's pacemakers in Lingang, Siemens' diagnostic reagents, and Roche's branded equipment.

Rather than "import-and-distribute," Shanghai wants multinationals to fold China into their core industrial architecture – R&D, manufacturing, clinical trial pipelines, and eventually exports.

The message for global drugmakers is clear: China's largest healthcare market is expanding, but only for companies willing to invest in its factory floors.