China's drug innovation and policy environment.

1359-6446/06/$ see front matter 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.drudis.2010.05.004 China’s reform and opening-up in 1978, pharmaceutical industrial output value has been increasing at an average annual growth ratio of 16.6%. To gain a competitive edge in the global market, the current national strategy of China forcefully pushes for independent drug innovations. Drug innovation is central to China, at both the individual firm level and national level. First, the pharma industry is knowledge-intensive and companies rely on innovation to improve performance and gain competitive advantages over rivals. Second, the government needs the pharma industry continuously to conduct research and development (R&D) to discover affordable new drugs to counter emerging diseases and maintain public health. Given the strong influence of the centralized power in China, drug R&D is inevitably constrained and facilitated by government policies. Therefore, a discourse of the historical, legal and regulatory contexts in which China’s drug R&D has evolved will help to understand the impact of national policies on drug R&D, which can be used to inform decisionmaking on investments in China or conducting technology trade and international cooperation with Chinese partners.