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DRUG PRICES

China Set to Increase Number of Drugs Subject to Price Controls

List of essential drugs may begin to include patented western medicines.

MARIE DAGHLIAN

The Burrill Report

“The essential drugs list is part of China’s goal to deliver affordable healthcare to a greater portion of its 1.3 billion population.”
China’s official Shanghai Securities Journal reports that the government will increase the number of drugs on its “essential drugs” list to 700 from 307 by the end of the year. Drugs on the list are deemed critical to the health of the population, procured by the government, and subject to price controls.

Although the number of drugs on the list is set to more than double, it is less than the 800 products proposed in February when China’s Minister of Health spoke to reporters at a World Health Organization briefing. At the time, he said that there could be as many as 500 western drugs and 300 traditional Chinese medicines on the list.

China’s attempt to deliver healthcare at the lowest possible cost has led to quality control issues for many drugs. Many provinces are adopting what is called the Anhui model for drug procurement, based on its successful adoption in that province. Under this model, provincial contracts to supply drugs are open to blind bids, and companies often bid down prices in order to land the contract.

The essential drugs list is part of China’s goal to deliver affordable healthcare to a greater portion of its 1.3 billion population. Increasing access has come with its own set of problems ranging from corruption to overprescribing, especially of antibiotics.

The essential drug list was introduced in 2009, partly to address the problem of overprescribing, and included mostly basic generics. But in February Chen said that the new list may include patent protected medicines. “Drugs on our essential list today are mostly generics, but shortly I think pressure groups for some of the diseases such as cancer may ask for aid in some targeted therapies and we are considering that,” he told Bloomberg at the time.

This would be a blow to many multinational pharmaceutical companies, which are counting on emerging markets, and especially China, to bring in an increasing portion of their global revenues, as many of their medicines lose patent protection in the United States, Europe, and Japan.

Pfizer realized $2.6 billion in emerging market revenue in the second quarter of this year, an 8 percent growth instead of the double-digit growth it had projected. The biopharma is scaling back projections because, as CEO Ian Read told the Wall Street Journal in a recent interview, “the majority of the growth is going to local companies that sell low-price generics.” He also noted a major problem impacting revenue growth as “we don’t have the products there.”

Pfizer is currently setting up a joint venture with Zhejiang Hisun Pharmaceutical as a way address this issue and increase its reach in China.

Multinational drugmakers also face increased competition from Chinese drugmakers who are also struggling to be profitable in the face of price controls. The likely outcome is increased consolidation in the industry. In June, China Pharmaceutical Group, one of China’s biggest drug manufacturers, said it would acquire Robust Sun Holdings, a company that makes drugs to treat central nervous system diseases, for $1.2 billion. The deal adds to China Pharmaceutical’s presence in finished drugs and reduces its reliance on intermediates, bulk drugs, and active pharmaceutical ingredients.


August 23, 2012
http://www.burrillreport.com/article-china_set_to_increase_number_of_drugs_subject_to_price_controls_.html

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