China: Present for the Journey
Five steps to building a world-class government affairs function in China. 
2015-9-18 16:04:38
0
Jonathan Zhu

本文转载自pharmexec


传送门:跨国药企在华新旅程:追求增长、应对丑闻、提高声誉

Tighter public scrutiny combined with tough new standards for clinical testing and the regulatory approval of foreign medicines are clouding future revenue projections for multinational drug makers in China. But this also represents an opportunity—if companies adopt a forward-looking approach based on close internal, cross-functional collaboration and coordinated outreach to the local stakeholders that count.


China's pharmaceutical market has grown tremendously in the past 20 years. It is now poised to overtake Japan to become the second largest country   

Getty Images

market by spending on drugs and treatments, after the US. The investment firm Morgan Stanley estimates that China’s spending on medicines will likely double over the period between 2012 and 2017, by which time it could represent 15% of the $1.2 trillion in expected global outlays.


As these numbers suggest, sales have not been an issue for drug producers. The Chinese government continues to expand social insurance coverage while it widens the role of the private sector. For example, the Ministry of Health in Beijing has suggested that up to 20% of hospital beds could be privatized by the end of this year.


Growth, however, has come at a price. Profit margins, for example, are lower in China than in the West. Moreover, even as Beijing has encouraged foreign drugmakers to partner with domestic peers, scandal has, at times, touched both global and domestic players and provoked a stern official response.


Beyond stamping out corruption, the government has other plans for the industry—most notably reshaping the country’s domestic pharmaceutical market by redistributing expertise from foreign entrants to domestic peers, as it has done in other technology-based industries. No longer content to drive Chinese GDP growth through foreign direct investment, the current administration is emphasizing China's domestic capabilities and looking to achieve a sustainable rate of growth through innovation. To that end, the government is encouraging partnerships between foreign and domestic drugmakers, as well as with local Chinese clinical laboratories. 




Moving goal posts


For multinational pharmaceutical companies, these external factors are raising the stakes for local management, complicating profit forecasts and imposing new levels of uncertainty. It follows that the increased government oversight is raising the bar for the performance of foreign pharmaceutical firms' government affairs (GA) and reputation enhancement functions in China.


Nowhere was this on more vivid display than in early 2014, when the Chinese Food and Drug Administration (CFDA) announced that the registration of foreign drugs would henceforth require three applications and three approvals, up from two applications and approvals. The move caught many drugmakers by surprise, and the absence of details around implementation and the grandfathering in of existing applications left some multinational corporations (MNCs) wondering whether there should have been advance notice.


In retrospect, the lack of communication shouldn’t be so surprising. Apart from the government’s historical reticence in such matters, it’s worth noting the resource constraints involved: China’s Center for Drug Evaluation (CDE), under the country’s CFDA, regulates more than 4,000 pharma companies with a staff of only 110 employees. By contrast, its US counterparts, The Center for Drug Evaluation and Research (CDER) and The Center for Biologics and Research (CBER) of the US FDA, regulate about 200 pharma companies and collectively have a staff in the thousands. Moreover, the entry barriers in the US, in the form of application fees, are much higher.


Tasked with monitoring developments in government policy and attitudes, the local GA functions at many international pharma companies were the most surprised of all. After the change was announced, many GA leaders struggled to gain insight into the decision from either policymakers or other regulatory stakeholders, and some found they lacked both the strategy and execution channels to mitigate the challenge and associated risks.


While some questions regarding the policy reinterpretation remain unanswered (and likely will), the business of developing and producing drugs and treatments for Chinese patients carries on.


In fact, forward-looking MNCs are starting to recognize that these events present an opportunity to reframe the way the GA function engages with stakeholders, while also preparing their organizations to successfully compete for a future in which strategies, structures, and talent are recalibrated to anticipate and engage a changing market—not merely react to it. In our experience, organizations that professionalize their GA functions will be best placed to navigate this new environment.


Time to collaborate

The CFDA's departure from the “two applications, two approvals” process created immediate issues for the regulatory affairs (RA) teams of multinational pharma players. While the regulatory changes might have appeared as a RA challenge at first, with solutions focused on technical mastery of the issue portfolio, it actually proved to be an area where GA teams could best support, coordinate, and lead the response.


The core challenge emerging from the CFDA-induced crisis is the relative lack of regulatory clarity in the industry, especially for projects currently in the approval process. The industry trade press has spilled considerable ink over the issue, but the CFDA itself was, characteristically, quiet. Letters were sent by most firms to the CFDA seeking clarification on the ruling; the response, however, was simply to acknowledge the letters had been received and were under consideration.


In such circumstances, more nuanced channels to share messages to the regulators and the broader Chinese public might have had a material effect. Quiet phone calls arranged between the local CEO and a policymaker, or meetings on the sidelines of a public event or other engagements should be staples of GA best practice in China—but often aren’t. The lack of any clear view into the Chinese government's motivations on such a vital P&L issue draws more attention to the increased role GA could play. While more effective coordination and support for RA would almost certainly not have changed the policy, it might have given pharmaceutical executives an earlier opportunity to comment—or at a minimum, prepare.


More than ever, commercial line management professionals in China as well as other local business support functions need the external-facing skills of their GA colleagues. The magnitude of the shifts in the competitive environment and regulatory space necessitates greater expertise and coordination between the typically siloed functions that populate the local biopharma business platform. This, in turn, demands a more strategic orientation from the Chinese side—yet that big strategic focus has to be seen as learned behavior for local managers. The traditional tendency among Chinese managers is to emphasize tactical and operational issues that fit better within their own, more limited sphere of control. 


Addressing these challenges should start with the designation of GA as a key contact point—the interpreter, if you will—in this often delicate relationship between the Chinese enterprise and the HQ office. Both sides need to be aware of the separate evolution in the conduct of GA activities. In the US, for example, lobbyists have relatively easy access to policymakers, while in China, access is significantly constrained. The US drug registration process is explicit and standardized; in China, while the letter of the law implies a similar degree of clarity, the reality is approvals can hinge on seemingly unrelated factors, the most important of which is the quality of a particular relationship. Global leaders expect a high level of transparency and consistency and fail to understand why China might be different.


The perception gap is compounded by the cultural resistance of Chinese managers to relaying or explaining bad news, which if not addressed proactively can impair that all-important element of trust with HQ. Every effort must be expended to emphasize with Chinese colleagues the value of consistency and transparency in building long-term ties with influential healthcare players in China. If that transition takes place, fewer such “cultural translations” will be necessary.  


Five ways forward

Overall, we see five steps that should be taken today to improve this vital GA relationship, both at the level of individual firms and as an industry.


1) Harness the power of public relations and corporate social responsibility programs. The biopharmaceutical industry in China has suffered from a history of lackluster public relations. Even in the face of scandal, companies have failed to create an appealing public narrative that emphasizes their place in the healthcare system as a source of new products and timely innovations that save or extend lives. Instead, as pharmaceutical distribution and sales practices were thrust into the spotlight, the industry adopted a defensive posture that did little to address the charge that such practices were the lead cause of high drug treatment prices. In reality, pricing is a complex issue with many trade-offs involving not just the international drugmakers, but domestic drug firms, central and local government policymakers, as well as pharmacists, hospitals, and other healthcare providers.


When the CFDA announced the change in approval policy, GA leaders might have resourced their public relations teams with clear tactful messaging to communicate the effects of this change on public health. Most did not, however, in part because corporate public relations (PR) has a relatively short history in Chinese business and is not as sophisticated as it is in the West. In the China offices of some pharmaceutical companies there is no PR function at all. Moreover, even where PR skills are well developed, cross-functional collaboration with other key parts of the local organization are often poor.


Specifically, the GA function must shift from a reactive function to a proactive partner with the corporate communications department. In addition to relaying policy considerations to executives, GA leaders should be actively working the public relations side of the business to inform and engage with stakeholders, including government officials, on the issues facing their company and industry. When the CFDA announced the change in approval policy, GA leaders might have resourced their public relations teams with clear tactful messaging to communicate the effects of this change on public health. Most did not, however, in part because corporate public relations (PR) has a relatively short history in Chinese business and is not as sophisticated as it is in the West. In the China offices of some pharmaceutical companies there is no PR function at all. Moreover, even where PR skills are well developed, cross-functional collaboration with other key parts of the local organization are often poor.


To be sure, a conversation with government officials should primarily focus on listening, but corporate communications can do more to share information about the value that foreign-based drug firms provide to the communities they operate in. A practical example is to draw tighter links between pharmaceutical companies' corporate social responsibility (CSR) efforts and their interactions with government. One global pharma company, for example, has been supporting the Ministry of Health in an important public health initiative by providing data and technical know-how. Such connections can only bolster the credibility of foreign firms in the minds of government officials.


Multinational GA teams can also aid their RA counterparts in managing the effects of regulatory change by presenting the views of the public and their downstream customers to government officials. To do so effectively, many pharma companies operating in China will need to get better access to providers so they might develop stronger, broader, and deeper relationships with patients. Leveraging such relationships to present the regulators with a richer picture of the effects of any policy changes on patients' lives can improve the nature of the company’s relationship with regulators. This shift to a more proactive form of government affairs should not be alien to most foreign firms operating in China, as the practice is common in the US and Europe.


Smart companies address organizational disconnects head on, recognizing that while the benefits of greater coordination between functions such as PR and GA far outstrip the effort required, the effort must be led by senior HQ leaders within the company and supported by dedicated resources at the country level.


2) Demonstrate the policy's effects on patients. Multinational pharma companies can also benefit by reframing the discussion away from costs and profits back toward patients and quality of care. The stated rationale for the “three applications, three approvals” change was a greater assurance about the safety of drugs and treatments introduced to the Chinese market. Focusing more clearly on this same goal could help MNCs open a broader discussion with regulators.


One of the clearest ways companies can demonstrate a new drug approval policy's effects is to support their conclusions with data, for example, by commissioning research from a respected third-party provider. Such data could examine the clinical and commercial effects of the changes on bringing new treatments to market, for instance, and include the implications for patients’ access to treatment. Data should also be employed to demonstrate the economic effects on domestic drug manufacturers, especially as it relates to building new sources of home-grown medicines innovation. High-quality empirical research of this type helps create an authoritative external reference point that government officials and management can discuss without being the latter party risking the perception of being unnecessarily provocative.


Data-based advocacy could significantly improve the level of engagement with regulators and broaden the discussion. Facilitating a collaborative relationship where industry representatives and regulators explore together the economic and scientific effects of policy changes should always be the goal. Argumentative language and aggressive posturing should, of course, be eschewed at all times in favor of a more measured, collaborative dialogue.


Direct advocacy is also important. As the Chinese government nurtures the domestic pharma industry and looks to stamp out improper sales techniques and other forms of corruption, it may bring a natural wariness to foreign pharmaceutical companies. Thus far, much of the resulting advocacy burden for multinational pharma firms in China has been shouldered by the R&D-based Pharmaceutical Association Committee (RDPAC). Representing 40 companies, RDPAC articulates the contributions of the international firms in China, with an emphasis on its members' investment in manufacturing and research facilities. While such advocacy is necessary, it isn’t sufficient, and shouldn’t preclude pharma companies acting on their own behalf as well.


More important, finding a way through any regulatory impasse will require international pharma companies to be more, not less, directly involved in communication with the government. Effective representation through in-house GA leaders must acknowledge underlying Chinese cultural assumptions that guide interactions with government leaders, whether by individuals, a company, or an industry body. Operating on cultural principles imported from other markets is short-sighted and will inhibit constructive dialogue.


For example, drugmakers' interactions with regulators in China are very different from the ones they have in the US. The difference in accessing Western and Chinese officials can be thought of using the analogy of an avocado and an egg. Just as the avocado has a soft exterior and hard core, Western regulatory officials readily grant personal access, but are typically unwilling to grant access to core decision-making processes. Chinese officials, for their part, resemble the egg. Although they present a hard, seamless shell, they are more fluid underneath. While initially slow to grant access, trusted counselors may be invited to share opinions with decision-makers.


3) Build alliances with domestic drugmakers. Improving the relationship with government officials, including regulators, must be a core focus of a strengthened GA function. However, it is not the only way forward. Just as regulators are likely to respond positively to economic and scientific research, they are also likely to look favorably on positive feedback from the domestic pharmaceutical industry. Given the stated goal of developing local Chinese players, cultivating relationships with domestic pharma management is a prudent course for multinationals to take. There is substantial scope for inviting domestic Chinese drugmakers to contribute their influence and understanding to their foreign GA peers.


For example, many of the senior executives and board members of Chinese pharmaceutical firms also serve on committees of the Chinese People's Political Consultative Conference and National People’s Congress, two of the country's highest political bodies. Participation in these bodies grants access to policymaking at a level that foreign GA leaders and their executives cannot reach on their own.


Relationships with domestic peers will give foreign GA leaders relational, albeit indirect, access to policymakers. Even if meetings cannot be arranged, the management at domestic pharmaceutical firms can offer vital insights into the prevailing regulatory mindset. While MNCs should only pursue alliances and joint ventures with a clear strategic rationale behind them, they shouldn’t overlook the opportunities that such third-party tie-ups afford them when it comes to amplifying their messages with regulators.


4) Cultivating additional voices of influence. Balancing broad, public discussion and engagement with experienced retired senior government officials can also help cultivate valuable influence for MNCs in China. While RDPAC has successfully pursued the bottom-up approach of engaging with the public, more can be done to build strategic connections with key opinion leaders, especially the growing number of retired policymakers.


Too often, the conversation between foreign drugmakers and regulators is adversarial. Rather than frame the discussion as between two competing positions, influential figures in China's domestic public health dialogue can help bridge the two positions. To seek common ground, GA leaders should actively identify and resource these key influencers using trustworthy economic and scientific research, as discussed.


Government officials can be invited to engage with foreign pharma companies' internal events. When firms hold their annual staff gatherings, for example, the insights and perspectives of experienced officials would hold great value for RA staff, while potentially deepening essential rapport between GA leaders and local officials.


Within the Chinese government's oversight of the pharmaceutical industry, much can also be done to cultivate support in new quarters. Drug regulation is split amongst China’s Ministry of Health, the CFDA, the NDRC, and the Ministry of Human Resources and Social Security. At the local level, drugmakers are confronted with similar layers of bureaucracy as they navigate import procedures and regulations, taxation, tendering processes, and labor relations.


GA leaders in foreign pharmaceutical companies should rigorously examine their levels of access and networks beyond routine regulatory oversight. While the first generation of GA leaders in China were more likely to possess such connections, today’s GA leaders must now apply themselves to improve this core responsibility.


5) Bring global leadership and policy experience to China. Foreign pharmaceutical firms attempting to improve influence and access without bringing the full resources of a global organization to bear are unnecessarily limiting their efforts. Much of the GA work done in China by MNCs has been driven locally, however, and companies’ failure to tap into the experience and insight available in a MNC has hindered support for their efforts. Global leadership at multinational pharmaceutical firms need to better understand and more actively support the efforts of local GA and RA functions.


Companies can start by making better use of global executives' time spent in China. Many of the biggest global drugmakers send their CEOs to international economic forums in China, yet far too many hop back on the plane without meeting national, or even local, government officials. Drugmakers whose China operations report directly to HQ, instead of being subsumed within a regional reporting structure, often do best here. Making China its own “super-region” also gives the local GA function a stronger voice at the global level, since there is no intermediary bureaucracy to stand in the way.


Direct engagement with Chinese officials and influencers is the natural starting point, but much can be done outside of China, too. Numerous exchange programs between Chinese and American government agencies, as well as European pharmaceutical agencies, offer invaluable opportunities to share new opinions about regulatory issues with Chinese officials, and patiently seed future discussions.


Much of this can be done through global trade organizations, such as the Pharmaceutical Research and Manufacturers of America (PhRMA). Representing the interests of the largest US drugmakers, PhRMA could more seamlessly convey the concerns and proposals of multinational drug companies in China as a part of the group’s existing market education efforts.

Hire the whole package

At its most simple, GA is about business planning and access to government. But this is not the end for orienting government affairs in China. Multinational pharma companies have run sizable GA functions for decades, but the experience levels and skills of the teams have changed.


In the past, the heads of GA were often leaders with impeccable access to the highest levels of policymaking because of shared connections among the first generation of leaders thrust into positions of responsibility when China opened up. The small leadership pool of the late 1980s and early 1990s meant interconnectedness was almost assumed among the governmental authorities and corporate executives.


Many GA leaders from that first generation have since moved on to other pursuits, opening the way for a new generation. This new cohort, however, does not generally have the same level of intrinsic access to government officials as their predecessors did, in part because industry growth and the rise of domestic players means that multinational pharma companies contribute relatively less to the overall employment and industry investment as they once did, and, therefore, are no longer “valued” as much. To compensate, the accompanying skills of the GA team leader must be that much sharper.


Within global, multifaceted pharma organizations, for example, leadership integrity is especially valued in GA team leaders. Recent PR crises around pricing and physician subsidies saw the integrity of some firms' GA teams exposed. Substantive business skills and access are vital for GA function heads, but personal integrity must be the starting point—and must be maintained above all.


Intelligently allocating resources within the GA function is another vital skill that the function’s leaders should possess. Establishing responsible, sustainable structures that address the needs of such a broad group of stakeholders (including government officials and internal company stakeholders) requires exceptional managerial skills. Running an expanded, energized GA function, and actively coordinating with PR and RA counterparts, calls for effective team-building and personnel management skills.


A high-functioning GA leader should also be a strong collaborator, able to effortlessly communicate and coordinate activities and plans with both global and local stakeholders and, thus, earn buy-in for future efforts.

The six essentials


Finally, GA must compete effectively for talent. Demand for capable GA professionals, including those with full facility in the English language, outstrips the available supply. Retention of talent is a significant problem. Many MNCs map their high potential employees in China but it’s much harder to find appropriate roles that satisfy both the needs of the organization and the individual. Few companies in our experience go the distance in keeping talent, but those that do tend to focus on six essentials of motivation: responsibility; professional development opportunities; chemistry/team fit, beginning with the direct report relationship; compensation and benefits; company “brand” and reputation; and the daily work environment.


Companies that understand these motivations and their relative importance to key employees (as well as how perceptions can change over the course of a person’s career) will have the edge when it comes to keeping the best people on board—at least for the five years that is the current average tenure we’ve observed for local professionals in foreign-based drug multinationals in China. One tactic that is not being utilized enough is offering rotational assignments at HQ for the China-based GA team, which is a substantive way to help locals understand the business and the parent company culture. The drawback is that it can deprive the Chinese business of the people it may need the most, even if the payoff is superior in the long-term. 


Go full in

The dynamic and occasionally unpredictable environment that characterizes China's pharma industry calls for new levels of coordination, leadership, advocacy, and creativity from MNCs' GA leaders. Realizing the opportunity will require GA leaders to coordinate with public relations and corporate social responsibility, demonstrate the effects of policy changes, build alliances with domestic drugmakers, cultivate relationships with key opinion leaders, and better leverage their firms' own pools of global leadership.


Understanding the ramifications of the “three applications, three approvals” testing process and adjusting business plans accordingly has been a top priority for foreign drugmakers in China since mid-2014. It will remain an area of focus for 2015-2016. Smart companies are looking even further ahead, grounded as they are in the understanding that future business projections rest on better understanding, and resolving, these fundamental regulatory questions through the efforts of a much strengthened GA function. Such efforts can help the pharmaceutical industry find solutions that meet the needs of both multinational companies and concerned local governments. Companies that invest in building strong GA functions will have the upper hand in navigating the fast-changing market for pharma in China, and position themselves well for years to come.

E药脸谱网
分享:
您可能感兴趣的文章
最新评论
精彩评论
暂无评论
提交
查询好友:
注:选择好友后只会分享给指定好友,不选择则分享到本站。