China Cuts Drug Prices

The Chinese government has set new price regulations for pharmaceutical drugs. This new price cut comes amid the country’s attempt to overhaul the health-care system. The Wall Street Journal reports:

Retail-price cuts averaging 17% will take effect Oct. 8 for 95 oncology, immune-system and blood-related drugs and 200 formulations, the National Development and Reform Commission, China’s main economic planning agency, said on its website Tuesday.

The overhaul of the health-care system aims to make doctor visits and pharmaceuticals more accessible and affordable, expanding the national health-insurance system to cover more diseases and to apply price controls to more drugs in the future.

Of every 100 deaths in China, 85 are now caused by chronic diseases, such as cancer, according to China’s Ministry of Health. By comparison, the U.S. rate is 70 per 100, according to the U.S. Centers for Disease Control and Prevention, and the world-wide rate is 63 per 100, according to the World Health Organization.

The government offers reimbursement of up to 50% for the 95 drugs on the list.

This is only the most recent price cut in pharmaceutical drugs. According to Business Week, China has cut prices more than 20 times since 2000:

The price cuts, effective October 8, comes as China seeks to rein in the rising cost of health care for its aging population. Policy makers are also expanding national health insurance coverage to include more major diseases, and adding to its list of essential drugs, for which prices are controlled by the government, Health Minister Chen Zhu said yesterday.

“This latest move was in-line with past drug price cuts of about 18 and 19 percent, so the market would see this as quite reasonable,” said Gideon Lo, an analyst with Nomura Holdings Inc. in Hong Kong. China has cut the price of drugs five times since 2009, and more than 20 times since 2000, Lo said in a telephone interview.

“Companies that have products that are focused on these specific therapies could see an impact to their prices,” Lo said. Companies that may be affected include Jiangsu Hengrui Medicine Co. (600276), which focuses on oncology drugs, Hong Kong-based Lansen Pharmaceutical Holdings Ltd. (503), which makes immune system drugs, and Hainan-based Sihuan Pharmaceutical Holdings Group Ltd. (460), which makes both oncology and blood system medicines.

As the government continues to cut drug prices, there has been some concern over the impact on drug companies’ profit margins, but drug companies with higher diversification in the pharmaceutical market will be less affected. From Reuters:

“The NDRC has reduced the maximum retail prices, but in many cases these drugs will sell for less than the maximum price due to market forces, so it sounds a bit more scary for the manufacturer than it really is,” Mann said.

However, companies that may be impacted are oncology-focused Jiangsu Hengrui Medicine Co Ltd, and U.S.-listed 3SBio Inc which makes drugs for cancer, inflammation, kidney and infections diseases, Mann added.

“Because most Chinese drug companies are fairly diversified, they will have some exposure, but it will be limited,” he said.

See also China’s Battle for Drug Safety, via CDT.

September 18, 2012 9:26 AM
Posted By:
Categories: Economy, Society