China’s State Council announced a new policy promoting generic drugs on Tuesday that aims to lift the standard of the country’s pharmaceutical manufacturing and make affordable medication available to more people.

The policy, which comprises new quality standards and tax incentives, encourages the pharmaceutical industry to produce high-quality generics to meet domestic demand and compete in the international market.

The Chinese pharmaceutical industry was valued at $108 billion in 2015, and 95 percent of drugs approved by the China Food and Drug Administration are generics. However, many patients in China with cancers or rare diseases are forced to use expensive imports, either because there are no generic drugs available to meet their needs, or because domestic generics are ineffective or have severe side effects.

In the words of a spokesperson from the National Health Commission, the new policy will help “transform the country’s generic drug industry from a large one to a strong one.”

The policy sets higher standards for materials and techniques used to manufacture generic drugs. For the first time, regulation directs public insurance providers to cover generic drugs under the same standards as branded drugs. The policy also offers tax breaks to encourage pharmaceutical research and production of high-quality generic drugs.

Zheng Weiyi, a professor from Nanjing Tech University’s pharmaceutical sciences school, told Sixth Tone that quality control is critical, as pharmaceutical companies often sacrifice quality to produce low-cost generics. In some cases, generics have endangered public health: In 2014, 90 million capsules containing toxic materials circulated on the Chinese market.

“Many Chinese patients and even doctors have no confidence in domestic generics,” Zheng said.

Theoretically, generic drugs should offer the same results as their branded equivalents in terms of efficacy and side effects. However, many generic drugs currently sold on the Chinese market fall short, as bioequivalence testing was not mandatory until 2012. It wasn’t until 2016 that the State Council first issued regulations for consistent evaluation of generic drugs.

Zheng predicted that the new policy would help improve quality but would also send ripples through the industry. “The cost for developing drugs in China is now much higher than a decade ago,” said Zheng. “With higher standards to meet, small companies are likely to be swept out of the market.”

As China’s pharmaceutical industry comes under greater official scrutiny — reducing the opportunity to profit from selling low-cost, low-quality drugs — incentives and insurance policies are becoming increasingly important to manufacturers.

Meanwhile, China is already stepping up to the plate as a major player in the global drug market, with more domestic manufacturers making generics for export. According to the Financial Times, 38 generic drugs produced by Chinese companies were approved by the U.S. Food and Drug Administration last year, compared to 22 the previous year.

“The Chinese pharmaceutical industry is now at a turning point,” Zheng said. “Companies that rely on advanced technology rather than low-quality drug sales are the future.”

Editor: Qian Jinghua.

(Header image: VCG)