Animal Health Pay-As-You-Go And A Chinese Gamble

Beefs and Beliefs

Whole animal health industry supports paying its own government drug review costs and Elanco invests $100 million in a Chinese company.

Published on: April 11, 2013

The animal health industry is taxing itself... sort of.

In reality the industry is collectively asking for reauthorization of the Animal Drug User Fee Act, a program whereby a significant portion of the costs of drug review is paid by the industry.

In fact, this piece of legislation pays about 40% of the cost of drug review at the center for veterinary medicine, says Ron Phillips, vice president for legislative and public affairs at the Animal Health Institute.

He explains it is typical for medical manufacturing companies to have and support these user fees, including those involved in human medicine.

The Animal Drug User Fee Act was first passed in 2003, then reauthorized in 2008. Phillips says there is no doubt it will be approved by House and Senate again this year. The only concern is what amendments might get attached to the bill since it's considered a "must-pass" piece of legislation.

"This is the industry giving the government money," he says wryly. "Is there any danger the IRS will call you and tell you not to pay your taxes?"

I'm hoping for little interference, despite the current political climate.

In another piece of animal health news yesterday Elanco announced a $100 million investment in China Animal Healthcare Ltd., a Chinese company.

Elanco, the animal health division of Eli Lilly and Company, said it is purchasing a minority equity stake in the Chinese company and that it is one of the leading players in the animal health industry in the People’s Republic of China.

Elanco officials said they have a "long-term commitment to China" and suggested the increased business interaction could help with issues such as China's rejection of meat products grown with the use of beta-agonists such as ractopamine, an important product for Elanco.

Specifically, a company spokeswoman said: "Completion of this purchase is subject to the satisfaction of certain conditions. The investment expands Elanco’s commitment to China, with the goal of providing innovative, safety-enhancing food production solutions to help meet the growing food demands and nutritional needs of the Chinese people. The parties have agreed to a framework to allow for future commercial collaboration activities."

Elanco President Jeff Simmons said, "At Elanco, we are committed to providing innovative solutions to enhance food production and companion animal care. In China, we are working with local stakeholders to improve the health and performance of animals and help to ensure a growing supply of safe, affordable and abundant food," said. "Our sizable financial investment in China Animal Healthcare builds on our long-term commitment to China. By working with local stakeholders, together, we can make a real difference in the lives of the Chinese people."

Elanco also indicated it will share technology with the Chinese subdivision, perhaps existing technology, but refused to be specific about which technologies.

Simmons said the primary opportunities in the short run are for technology affecting pork and chicken but that dairy and beef technologies could also come into greater usage in the future. Simmons says the company is looking at future population growth and growing food markets for animal protein. He says some predict a 75% increase in animal-based protein demands by 2050 and says much of that will be in Asia.

My personal opinion is it's always dangerous to do business with the Chinese because they take what they want and then sell it back to your customers, undercutting you on the price. I could start listing examples but you can find plenty yourself by just doing an internet search.

However, it's not my money and I wish Elanco well in its venture.