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The central government will increase investment in developing new drugs and encourage innovation in domestic pharmaceutical companies, according to the National Development and Reform Commission.

At least 5 percent of income from pharmaceutical sales of major companies will be reinvested in research into new drugs and medical equipment, said a national guideline for the development of medical and pharmaceutical industries.

The guideline, released early this week, was mapped out by the commission to guide China's medicine industry development in the coming five years.

Insufficient funding for research and development and a lack of innovation has seriously hampered development of China's pharmaceutical industry, Zhang Guobao, vice-minister of the commission, was quoted by Xinhua News Agency as saying.

In Chinese drug companies the average percentage of research investment from total sales income is 1.02 percent.

Currently, the main research units for new medicines in China are research institutes and colleges.

And only half of the large and-medium-sized pharmaceutical enterprises have special research departments.

Due to the lack of innovation, the majority of products of Chinese companies are copied from overseas counterparts.

Usually these products only require low-level techniques.

The laggard research capacity also confines many companies to producing similar medicines. For example, there are nearly 300 enterprises producing aspirin.

To achieve a larger sales volume, they have to constantly reduce prices, and many enterprises are facing bankruptcy.

In 2004, there were 4,738 pharmaceutical enterprises in China. However, nearly 84 percent of them are small ones.

According to the guideline, the nation will establish a new medicine innovation system, in which the enterprises will be the main engine of new product research and industrialization.

The key areas for new drugs will be cancer, cardiovascular and cerebrovascular systems, viral infections, nervous and psychological systems, blood sugar reduction and senile illnesses.

And the government will take many favorable measures, including taxation and financial investment, to improve enterprises' behavior in this field. No details about these measures are available.

(China Daily September 7, 2006)