Evolution Of Pharmaceutical R&D Governance Modes And Its Implication For China

Pharmaceutical industry has made great contribution to human health andeconomic growth. As a typical hih-technology industry, its R&D activities are high-investment, high-risk, long-cycle, strictly regulated by govermnets and affected byenvironment change. Herein there has been many governance modes of pharmaceuticalR&D (GMPRDs, hereinafter) evolved accompanied by times and environmentchanging, cause they directly relates to innovation productivity and value realization.Especially since the1970s, this evolution has shown a high-speed and diversified trend.As incorporated into the Strategic Emerging Industries, China’s pharmaceuticalindustry is transforming, which not only need the transformation of industrial structure,but also the transformation of innovation system. Along with the advancement ofHealth System Reform, the implementation of one of the major science and technologyprojects——"Major Creation of new drugs" and the rapid growth of localpharmaceutical market, China’s pharmaceutical innovation is facing up to a newcomplex environment. Therefore, as to provide references and guidances for thedevelopment of the innovation system in future， it is necessary to take a systematicdeep study on the GMPRDs’ evolution drove by environmental change and its currentstatus and future trends. With thees purposes this study is consisted of three parts asfollow。Part1：The Theoretical Study.1. The theoretical understand bases construction of innovation processes andgovernance modes of the pharmaceutical R&D. Firstly, through discriminatingrelevant concepts, the term of GMPRD is defined as a widely recognized basic modewithin the industry peers adopted to internal and external resources distribution and toR&D activities organizing and management effectively for innovative drugs. Secondly,based on previous contributions on technological innovation, we regard thepharmaceutical R&D as a system that constituted by an administrative subsystem anda technolical subsystem, and its innovation processe as a construction and governanceporcess of an actor-network by the dominate actor (take charge of the administrative subsystem), in which the innovation practice theme is pharmaceutical R&D. Finally,through reviewing previous classification literature on governance modes oftechnological innovation, we chose several governance modes to be focused: Mergersand Acquisitions, Joint Ventures, Technology Alliance, Outsourcing and TechnologyLicensing.2. The development of the qualitative framework and quantitative method foranalysing the evolution of the GMPRD. Firstly, a framework to analyse the evolutionprocess of GMPRDs qualitatively is developed based on the theories and methods onorganizational evolution attributed by the economists Nelson and Winter andsociologists Hannan and Freeman. The framework is sonsited of the five steps: theeffective change of environment, the variation of an old GMPRD, the appearance,legalization and flourish of new GMPRD. Secondly, we develop a quantitativ methodto analyse the legalization of GMPRDs in their evolution, in which the GMPRDs’ UsingFrequencies indicates their legalization, through analogizing the GMPRD withorganizational population and introducing the organizational population statisticsmethod from organizational ecology theory into this study.Part2: The Empirical Study.1. The qualitative analysis of the evolution of the GMPRDs. In the qualitativeframework established above and with a historical environmental system analysismethod, lots of important technology, regulatory and economy changes closely relatedto the pharmaceutical R&D are extracted and compared to the events in the evolutionprocess of GMPRDs. In the qualitative analysis, we find that the changes ofenvironmental factors driving the evolution of the GMPRDs by affecting theadministractive subsystem directly and the technological subsystem indirectly. In thesefactors technological change play the most important role for causing environmentalchange most drastically and for affecting both the subsystems. Besides, it is not the casethat one to one correspondence of an effective envitonment change and evolution of aGMPRD, but one to more, more to one or more to more, which inflects the complexityof the evolution. And, there is a certain lag phase between the change of environmentalfactors and the rise of a new GMPRD, which confirms the legalization process.2. The quantitative analysis of the evilution of the GMPRDs. Applying thequantitative analysis method developed above,we take a longitudinal descriptivestatistical analysis of the five governance modes’ Using Frequencies, drawing supportof the data from three databases——SDC Platinum, One Banker and Pharma Partnering ——about pharmaceutical R&D agreements information between pharmaceuticalfirms, biotechnology firms, universities and public research institutes. It’s found thatthe whole legalization process of these new modes goes well, hence restricted by theindustrial capacity for each mode, the in-house R&D mode must be declining.Moreover, another similar analysis is made about the inter-regional globalization of allmodes in their legalization processes, represented by cooperations between Europe,America and Asia. It’s shown that the Use Frequencies of the three kinds of cross-regional cooperation rise while its Preference declining. Besides, the cooperationsbetween Europe and America are dominating, the cooperation Preference with Asiaseparately tends to be on a slow upward trend both. It explains that, geographical factorsstill, to some extent, hinder globalization,while the importance of Asian actoers is beingmore importantly in global pharmaceutical R&D efforts.3. The summarization, description and prediction for the evolution process,current status and future trend of the GMPRDs respectively.Fistly, an overall viewtaken of the evolution process of the GMPRDs shows that it’s not only a process ofpharmaceutical R&D system opening, but also a process of the structure of the actor-network complicated. The evolution which shows an obvious times dependency isdivided into four generations,with the characteristics of academic, integration,networking and virtualization separately, according to characteristics of GMPRDs’community structures.Secondly, the current status of global GMPRDs is in the thirdgeneration, as the dominating modes are Technology Alliance, Outsourcing andTechnology Licenseing coexisting and competing under the open innovation paradigm,by these modes the widely distributed cooperative R&D network is formed betweenactors. Recongnizing this, with data from Pharma Partnering and the mothed of socialnetwork analysis, we investigated four types of pharmaceutical R&D cooperationnetworks resprenting four stages of the tipycal innovation process. It is found that thereis some stage dependence in the distribution of important actors but big pharmas occupyhigh indgree positions in the cooperation network of each stage, which means thecurrent network is a multicenter complex network with large pharmaceutical companiesas stars. Finally, the future trend of the GMPRDs’evolution is analysed in two aspects,namely,the environment changes and the upper capacity limit of the industrial for eachmode. It shows that the governances of pharmaceutical R&D is expected to bewidespreadly multiple actors allied in future and the GMPRDs will be opened,networked and virtualized successively. Part3:The Application Study.1. The currant status analysis of pharmaceutical industry in China. Firsly weanalyse the intension and task of transition of pharmaceutical industy in China, throughcomparing to those in the USA and Japan. Then through summing up multiple facts, weanalyse the context ofChina’s pharmaceutical industryintransition which provide bothpressure and power for the transition, as well as its complex characteristics that are bothfractured and geared to international market in terms of products, structure andinnovation capability.2. The currant status analysis of the GMPRDs in China. Fistly in investigatingthe innovational drug lunched by China’s actors, we found that China’s GMPRDscommunity is transiting from the first generation to the second generation, also reflectsthe complex features of " fractured and geared ". Secondely the position of China’sactors in the global cooperation whole network is analysed, with the data frome SDCPlatinum and Pharma Partneirng database, as well as their ego networks, for theimportance of R&D cooperation nerwork realized in Part2. We find that the positionof whole China’s players between that of special player are very disharmonious, thefirms’ roles significantly lower than the government’s, and the construction of firm’sego networks significantly worse than thoses of their international counterparts.3. Enlightenment. The major challeges of Chimna’s pharmaceuticalindustry areboth to solve the problem of “fracture” and to respond effectively to environmentalchanges thoses drives the evolution of GMPRDs. Bassed on this logic, three groups ofsuggetions are put forward as follow.For the government:（1） to speed up the cultivation of large pharmaceutical companies’dominatingroles in innovation;（2） to create a policy environment and innovation eco-system conducive forvarious innovation bodies corporation;（3） to promote the development of bio-pharmaceutical industry that closer tointernational level;（4） to increase expenditure for the front end basic research and basicinfrastructure, especially in the areas that weill lead to pharmaceuticalinnovation technology change dramatically. For universities/public institutes:（1） to gradually shrink sphere of competence in cooperation with firms;（2） to establish a long-term mechanism and facility for information exchangewith clinical hospitals;（3） to strengthen the integration of information and database technologies intopharmaceutical R&D technical system;（4） to fully mining the potential of Chinese herbal medicine.For pharmaceutical firms：（1） to focusonthecorebusinessthroughmergers, acquisitionsanddivestitures,based on the property of thteir technical structure;（2） to accumulate economic and innovative strength through seizing theopportunities of global patent cliffs and fast-growing local market, basedon the their own development cycle;（3） to establish firms’own innovation network, through technology alliances,outsourcings, technology licensing and others GMPRD dominating, andeffort to get involved into international cooperation network;（4） to turn the key point of technological innovation governance fromGMPRDs choosing onto GMPRDs portfolio, partnerships and knowledgenetworks governing.Finally, the conclusion and limatition and the future direction of this study aregaven.