About a year ago I made a post about how Pfizer had really become a veteran Chinese hand, after it had agreed to conduct a study on the needs of China’s rural poor.  This was seven years after Pfizer had lost a series of trademark and patent cases since 2002.

I thought that Pfizer had learned an important lesson about doing big, SOE-sized business in China – it’s important to cooperate before you operate.

Pfizer has been on both the winning and the losing sides of China patent and trademark laws since 2002.  If anything, it has learned just how different a playing field China is than the rest of the world, and that access to this potentially rich pharma market has to be earned.  That’s why the announcement by Pfizer and PlaNet finance, “to conduct an in-depth research project on the health care needs of the working poor in China,” should be amusing new to many experienced China watchers for the sheer fact that it is a testament to just how ‘Chinese’ Pfizer has become.

At this point Pfizer would fit right in with local and provincial level Chinese officials soberly putting padded red envelope donations in boxes for the Sichuan relief efforts on live television, and staring intently into cameras for a few seconds before making the drop, so as to make sure that their faces were clearly caught by the upper level cadres watching the proceedings.  Even the mission statement present in the article screams “I get it.  We gotta co-operate to get some state level love.”

Today the WSJ Health Blog reports that China came up several times in Pfizer’s call with analysts early in the afternoon.  The call mainly talked about the approach that Pfizer was planning to take in the Chinese market.

In some ways, the approach sounds like pharma’s strategy in the U.S. a few years back, when the industry was swimming with sales reps and companies were aggressively wooing “key opinion leaders” — top physicians who could influence other docs.

Here’s how Ian Read, president of Pfizer’s drugs business, framed the Chinese market and Pfizer’s strategy in the country, according to a transcript from Thomson Reuters:

… in large part it is an out-of-pocket market, so brand loyalty and quality is really important. … our total portfolio is growing, and it is not as impacted as the United States or Europe is by [generic competition]. So this requires what I would call a traditional investment thesis, feet on the street, field force, relationships with physicians … invest with key opinion leaders

Last month, Pfizer said it planned to increase its sales force in China to 3,200, from about 2,300 now. That comes as the company makes some significant cuts to its total global workforce.

The phrase “we need feet on the street” jumps out at me here. It tells me that Pfizer continues to have an impressive understanding of the Chinese market.

Unlike physicians in the US, Chinese physicians have long gotten used to depending on drug sales for the majority of their pay check.  State provided salaries are small, and hospital oversight is opaque enough to make under the table payments from drug sales reps easy, and widespread.   With the new Essential Drug List that was finalized this past summer, under the table payments are going to be much hard to make because and overwhelming percentage of the most profitable drugs are going to be sold exclusively at rural hospitals  for a flat fee.   Hospital controlled pharmacies, too, are on the way out.  Moreover, exclusive drug distribution contracts will be granted to companies for each drug.  This means that competition between distributors will decrease, and the need for under the table payments will be substantially decreased.

The new reality will involve a lot more ‘feet on the ground’ because of where the most drugs are being sold (rural pharmacies) and because it will now take more time to persuade doctors that a particular product is the best product (harder in the sense that if will not be necessary to actually make a case for the product as opposed to forking over a red envelope with red 100 Yuan bills inside).

There is a reason that Pfizer is still alive in the Big Pharma Wars.