Entry into the World Trade Organization has been long awaited by many Chinese, but for domestic pharmaceutical enterprises it will be a big challenge.

It's not a secret that more than 97 per cent of domestically made Western medicines produced by Chinese pharmacies are copies, according to industry experts.

Besides increasing concerns about intellectual property, Chinese pharmaceutical enterprises know that patented new drugs rather than copies bring huge sales volumes and high profits.

"The future of the domestic pharmaceutical industry is reliant on the development of new drugs with their own intellectual property rights through high technology and genomic technology," said Li Ge, president of Shanghai-based Wuxi PharmaTech Co and compound chemistry scientist.

China has lagged behind the world's leading pharmaceutical producers for more than 30 years due to its chaotic domestic pharmaceutical industry and its low scientific research capability.

Many domestic pharmaceutical companies focus on short-term profits and making copy drugs at the expense of a long-term strategy, and so neglect the development of new products.

"Of over 200 local pharmaceutical companies, very few register their newly developed drugs of national class-one level every year," said an official from the local New Drug Registration Office. "Many of them are unaware of or incapable of carrying out scientific research."

The process from drug screening to the debut of a new drug in the market takes more than a decade, and the investment costs are between US$300 million and US$500 million. International pharmaceutical companies will spend more than 10 per cent of their revenues on research, but most Chinese companies do not reach double figures.

In 1998, the new drug research and development investment of the American pharmaceutical industry totalled US$20 billion, accounting for 19.6 per cent of the industry's income. Glaxo SmithKline alone invests around 27.6 billion yuan (US$3.32 billion) annually on pharmaceutical research-and-development programmes, and is the market leader in the industry. In the same year attribution investment in China was less than 100 million yuan (US$12.6 million).

"Developing me-too-drugs seems to be the best way for domestic companies, because it requires less investment and doesn't violate patents. More importantly, such new drugs can be developed within one or two years," Li added.

There is an old Chinese saying, "The gruel is meagre and the monks are many." The domestic drug market is shared by too many companies and the competition reduces the companies' ability to invest enough in research.

China, incredibly, has over 6,700 pharmaceutical factories, But fewer than 300 companies can be called large and none is a giant. Among the city's 200-odd pharmaceutical companies, fewer than 10 have annual revenue of over 1 billion yuan (US$120.7 million)

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