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Drugmakers slash prices to win China’s bulk-buy contracts

August 20, 2020

Drugmakers have slashed prices by up to 95% to win state contracts in China’s largest bidding round of its drug procurement programme, state media said on Thursday.

Beijing has implemented a national scheme where global pharmaceutical companies and Chinese generic drugmakers vie to sell their products in bulk at public hospitals.

In the latest bidding round for contracts worth hundreds of billions yuan in total, drugmakers cut prices by 53% on average, state media Xinhua reported, citing preliminary results.

It involves 55 types of medicines, more than the previous two rounds.

Drugs open for bidding covered some products that contributed more than $1 billion each to foreign drugmakers’ sales in 2019 but face challenges from generic versions offered by local drugmakers.

They included AstraZeneca Plc’s (AZN.L) heart disease treatment Brilinta, and blood-thinner Eliquis, jointly developed by Pfizer Inc (PFE.N) and Bristol Myers Squibb Co (BMY.N). Contracts for the two treatments were won by Chinese companies, according to preliminary results published by procurement authorities.

Foreign companies generally quoted higher prices in Thursday’s bidding and barely secured any contracts, said ICBC International Research analyst Zhang Jialin.

More expensive brand-name drugs still had opportunities in the market not covered by the national procurement scheme, thanks to their higher profile among patients and doctors compared with cheaper generic drugs, Zhang said.

Thursday’s bidding also showed China’s generic drugs market starting to concentrate around a few big players, Zhang added.

Units of Shanghai Pharmaceuticals Holding (601607.SS) won bids for six products, the parent company said in a filing.

For smaller firms, the bulk-buy scheme might risk driving them close to losses, said Wang Yue, a professor at Peking University’s School of Health Humanities.

“Many companies actually have no power to bargain with the government,” he said. “When the market changes, like when labour and logistics costs rise, the (low drug) prices are hard to sustain.”

For most products in Thursday’s bidding, if a single company won the bid, it could provide up to half of the total procurement volume in the first year. If there were at least four winners, 70-80% of the volume could be shared, procurement authorities said in official guidance last month.

https://www.reuters.com/article/us-china-drugs/drugmakers-slash-prices-to-win-chinas-bulk-buy-contracts-state-media-idUSKBN25G1IX

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