Has the new drug regulatory reform in China promoted innovation? : evidence from Chinese pharmaceutical companies

Abstract

The report of the 20th National Congress of the Communist Party of China clearly points out that we should promote the construction of a healthy China and prioritize the protection and improvement of people's health. As the core pillar of China's promotion of healthy China construction, the pharmaceutical industry is critically related to the people's livelihood, and its strategic importance is particularly prominent in the context of the global COVID-19 epidemic and intensified international competition in the field of life science and technology innovation. Based on the drug and medical device review and approval regulatory reform in China in 2015, this research explores the impact of systematic regulatory reform in the field of biomedical innovation at the patent level and firm level. The study found that the regulatory reform of China's new drug approval in 2015 has improved the quality of innovation in the field of biomedicine and encouraged pharmaceutical manufacturing companies to carry out more exploratory innovation in new science and technology fields, rather than blindly carry out applied innovation in known technology fields. With their transformation of R & D strategy, the R & D intensity, profitability, and total factor productivity of pharmaceutical manufacturing companies have been significantly improved. For regions with higher degree of intellectual property protection, higher degree of marketization, more developed market intermediary organizations and supporting legal system environment, as well as companies with stronger financing constraints, the role of new drug review and approval regulatory reform is particularly significant. The findings of this research have important policy implications for the transformation of China's pharmaceutical industry from generic drugs and imitation on the ‘me too’ drugs to more independent innovation and the rise of China domestic innovative drugs to benefit the patents in need in the globe.