Pharmaceutical Manufacturers Having to Adjust to a New Normal in China

| By | Drug Prices, pharmaceutical market

China’s biggest-ever round of drug price cuts saw global pharmaceutical firms losing most of the nationwide contracts to local rivals, as Beijing aggressively pushes to contain health care costs by an average of 53 per cent decline in latest bulk purchase.

Among 33 commonly used medicines in a bidding exercise on Jan 17, some moneymakers for global pharmaceutical companies had the deepest cuts, with the biggest one being as high as 93 per cent as shown in a government-funded medical procurement website.

Bayer’s diabetes drug acarbose had its price slashed by 80 per cent, said Zhang Jialin, a health care analyst at ICBC International.

Some other drugs in the group that included therapies for hypertension, dementia and viral infections saw prices drop more than 60 per cent in the bidding, Zhang said.

“Overall the price fall this time is deeper than the first round,” Zhang said. “Most of the originators are out in this round so the takeaway is that the exercise will gradually phase out originators and replace them with domestic companies,” he said, referring to the Western pharmaceutical companies that discovered and developed the drugs.

Global manufacturers are having to adjust to a new normal in China, which was once a lucrative market for their off-patent medications. In the previous round, this has resulted in prices of well-known medicines like Pfizer’s cholesterol pill Lipitor dropping as much as 74 per cent below what they priced previously in China.

In a new feature, the government has this time added a price ceiling for each drug. The price caps were as much as 95 per cent below current prices in China, according to estimates by ICBC International.

In some aspects, China has softened the rules of the exercise. As many as six firms could be chosen to supply 80 per cent of the national demand for the drug under bidding, up from three in the last round.

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