China, the world’s second largest economy, poses a paradox for American pharmaceutical companies looking to expand abroad. Some industry insiders say that China’s pharmaceutical sales will expand as much as 27 percent in 2011 to reach nearly $50 billion, making it the world’s largest drug market.

Yet China also faces a $7.3 billion trade deficit and its pharmaceutical industry lags amid global standards. Navigating the waters while facing political and economic waves requires knowing the ocean through which you must swim.

WiCon International Group, the publisher of the online trade magazine Pharma China based at 331 Sayre Drive, will present the third annual “Pharma China Seminar: Building Success in China’s Pharma Sector” on Friday, April 29, at 8:15 a.m. at the Princeton Marriott. Yan-Yan Li Starkey, director of R&D for the China market at GlaxoSmithKline, will co-present a lecture on growth opportunities in China’s over-the-counter (OTC) and consumer healthcare landscape with Stan Lech, also of GSK. Cost: $1,295. Visit www.pharmachinaseminar.com or E-mail: kelly@pharmachinaseminar.com.

According to Starkey, the Chinese OTC market holds steady at 19 to 20 percent growth per year. “In China the biggest opportunity still stems from the country’s economic growth as the fastest growing economy,” she says. “That’s the number one driver. Second would be the aging population.”

In January GSK announced it will double its investment for consumer healthcare and OTC business in China and plans to double its market sales in India and China by 2015.

Starkey was born and raised in Beijing. Her father, whom she says was “usually in the news” is a retired general of the Chinese army. Her mother is a pharmacist at a Beijing hospital.

Starkey has an M.D. from the Military Medical University in China, an M.S. in child neurology from Peking Union Medical College in Beijing and an MBA from the University of Illinois, Chicago.

She spent six years as a pediatrician at Peking Union Medical College Hospital before embarking on her present 17-year career in the pharmaceutical industry. In the early 1990s in China “M.D.” sardonically stood for “money-deprived.”

“The true motivation when I left that hospital to go to the pharmaceutical industry is that the income was ridiculously low to be a doctor in China,” she says. That doesn’t hold true today, but 20 years ago there was little money in the medical game there.

In 1993 Starkey became a pharmaceutical executive in Beijing with Schering Plough, managing the regulatory department and attaining product licenses. In 1997 Schering Plough sent her to America to earn an MBA.

She decided to stay in the U.S. as she immediately landed a job in New Jersey. Learning English was difficult. Because of the language barrier she couldn’t seek a medical or physician job so Starkey was hired as a project manager working on clinical trial management.

Over the next seven years she was involved in medical research, gaining an understanding of the OTC market and the potential benefits to consumers.

For four years Starkey was a project manager in a contract research organization before moving to medical-based positions, first as a medical director at Novartis. She joined GSK in 2007.

Building a brand overseas. Starkey got started in medicine in the 1980s after Deng Xiaoping’s opening of Chinese markets to foreign investment. Only a few companies — most notably Johnson & Johnson, Merck, and Bayer — laid footprints in China then.

“Johnson & Johnson was very successful starting in the early 1980s,” Starkey says. “They started by developing a famous product for toe fungi and athlete’s foot and they’ve built a successful, well-known OTC business in China for over 25 years now. By entering China early and starting with a joint venture they grew a very successful brand and they almost occupy the entire market.”

GSK did not attempt to replicate J&J’s model because it has its own business model. GSK is currently number two in China — just behind J&J. Still, Starkey does not see the two as competitors.

“We think about the patients first,” she says. “The most important thing is developing consumer trust through brand strategy and brand equity. The consumer must like you and stay on your product forever.”

Starkey also says that existing brands must utilize existing technology to make innovations and develop products, noting that “Chinese people love to discover new things.”

#b#Challenges in China#/b#. For China GSK set up various departments including a regulation department, QA compliance department, and a government affairs department. Each can be difficult to contend with as China imposes federal and state-specific controls over industry. Further complicating the landscape are issues surrounding switching certain prescription drugs to OTC to be sold in an entirely new capacity. Starkey says these regulations are the biggest threat to China’s pharmaceutical industry.

“The regulation is so bureaucratic and the government slows the process due to regulatory hurdles,” Starkey says. “Many products we [GSK] will put into the OTC markets have to be studied on the way they assimilate into the market, the policies affecting them, the timing of introduction, sales, and any safety concerns for patients.”

Another major challenge to China’s pharmaceutical industry is talent pool retention. Starkey says that China has attracted many intelligent people from overseas, and high demand causes internal fluctuations for companies in China.

“It’s a very high class of people working there now — a major difference from just three years ago when local people still held the majority of high-profile jobs in China,” she says. “I go to China roughly every three months and my offices there, at the direct-to-management level, are all hiring from Canada, the UK, and America. There’s an increase in opportunities for higher-educated people across the industry, which causes high turnover.”

Many companies have been strengthened by the practice, if only for the short term. Lower end jobs are easily filled by recent Chinese graduates, but most people making moves in China’s pharmaceutical industry have had a lot of industry experience in the United States and Europe. To turn the tables, substantial overseas recruitment efforts led to a situation hurting a burgeoning industry in China.

“I would like to find out, based on China’s fast economic growth and pharmaceutical investment growth with all companies allocating resources to China, how China’s current policy and medical regulations system can be justified and how can it match the speed of economic growth,” Starkey says. “We put double the money and double the manpower in China and we would like to capitalize on the country’s fast growth. But we don’t see regulations change much and we don’t see policies that really support us with this investment.”

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