As China tightens its laws to better protect intellectual property rights and steps up quality control of domestic-made drugs, 2002 will be a tough year for Chinese pharmaceutical firms, company executives predicted Monday.

"Chinese drugmakers are at the make-or-break point. A revamp in the domestic pharmaceutical industry will be phased in within three years," said Li Hongsheng, head of the State Drug Administration's market compliance department.

"Due to legislative amendments, companies unable to meet the new quality standards by December 31, 2004, will be wiped out," she said.

Li's remarks were made at the two-day China Pharmaceutical Executive Forum, which began Monday in Shanghai.

He Shuhua, deputy general manager of Guangzhou Pharmaceutical Co. Ltd., said: "Domestic drug distributors, which are cost-ineffective, slow to respond to market changes and conservative in terms of management, will come under intense pressure from foreign competitors. Foreign companies will grab about 20 percent of the domestic drug retail market."

Small Chinese drugmakers that are poorly managed and have low-quality products will be forced out of the market by the new regulations, forum participants said.

"The government has stepped up enforcement of laws prohibiting fake and substandard medicines," said Li Chiangling, a senior associate of Baker & McKenzie's Intellectual Property Group. "With the amendments of trademark, patent and copyright laws to comply with the trade-related aspects of intellectual property rights agreements, foreign drugmakers will enjoy better protection of their intellectual property rights."

Li said foreign companies have urged Chinese officials to impose harsher penalties on violators, such as imprisonment, property confiscation and fines based on the market value of fake drugs. Following a new rule governing drug advertising, foreign and domestic drugmakers are finding new ways to promote their products.

"Effective on February 1, companies will not be allowed to advertise in the mass media six categories of medicines, including those for treating angina, hypertension and diabetes," said Danny Ching, general manager of French drugmaker Servier International. "Some other prescription medicines still can be advertised until the end of the year."

China is the world's seventh-largest pharmaceutical market.

(eastday.com January 29, 2002)