Former Senior Manager at Yangtze River Pharmaceutical Group Beijing Haiyan Pharmaceutical Co Ltd
- Commentary on the latest round of bidding process, winning products and price reduction negotiations
- Attitudes of winning domestic and foreign companies, impact on their sales and profit, short-term and long-term countermeasures
- Pharmaceutical companies’ sales strategies, plus impact on the competition between generic and originator drugs
Led by the State Medical Insurance Administration, the pilot bidding processes for “4+7” quantity- specified drug procurement started on 6 December last year. During the first round, winning bids were selected for 25 drugs and the average price reduction was 52% (the highest was 96%). This has sparked heated discussion in the market. Can you help us understand the impact of the “4+7” policy on different parts of the value chain in the medical sector? Given the sharp decreases in the procurement prices of drugs, what do you think of the overall prospects of pharmaceutical companies?
Exactly how did the government negotiate with pharmaceutical companies? How did the government convince pharmaceutical companies to reduce their price to such a large extent? There might be a second round of bidding process in 2019. What is your prediction on winning products and price reductions?
There seemed to be vicious competition among pharmaceutical companies. Some companies lowered their prices to a great extent, so as to win the bidding, right?
You said that in the latest round of bidding process the average price reduction was 52%, and the highest was 96%. Winning bids were selected for a total of 25 drugs. The Zhejiang-based Huahai Pharmaceutical won the bidding for six drugs, and Jingxin Pharm, which is also based in Zhejiang, three drugs. The Jiangsu-based Hansoh Pharma, the Chengdu-based Brilliant Pharmaceutical and Yangtze River Pharmaceutical Group (YRPG) each won the bidding for two drugs. The other 10 winning bids came from 10 different companies. What is your estimate of changes in the product prices, sales volumes, sales revenues and profits of winning companies? How much cost can they save by eliminating distributors from the game? What are the pros and cons about being winning companies?
Procurement volumes, instead of proportions, are stipulated in official procurement documents. The procurement volume is estimated to account for only 30-50% of the drug demands in pilot cities, according to a brokerage which calculated based on the statistics from the Ministry of Commerce and sample hospitals. What is your estimate on that?
Only a minority of foreign companies won the bidding, including AstraZeneca’s gefitinib and Bristol-Myers Squibb’s fosinopril. What countermeasures do you think winning and non-winning foreign companies will take?
According to a notice released by Shaanxi Public Resources Trading Center on December 26 2018, Qilu Pharma has been approved to lower the online bidding price of its gefitinib from RMB 1,585 per pack to RMB 498. The price adjustment was effective on the day of release, representing a 68.5% cut in gefitinib’s online bidding price. Anhui’s drug centralised procurement platform has also issued a notice lowering the provincial centralised procurement price of dexmedetomidine hydrochloride injection produced by Hengrui Pharma to RMB 123 per unit. These two non-winning categories in the “4+7” drug centralised procurement bidding are trying to enter the markets in non-pilot cities by means of low prices. Can you comment on that? Is there a trend that non-winning companies are using a low price strategy to occupy markets in non-pilot cities?
The present pilot cities are usually well-funded, and in other regions, drug companies have lowered prices in order to compete with others. Is it possible that the drug centralised procurement policy will be implemented in more cities in 2019?
Considering the two-invoice system in the procurement of gefitinib and dexmedetomidine hydrochloride injection in Shaanxi and Anhui and their great price cuts, how much profit is left for manufacturers?
The drug price in Shaanxi, Anhui and Gansu provinces will be close to the bidding price. You also said YRPG intends to win the market in Gansu and Shandong through low drug price. What about the changes on drug price in other provinces? Will smaller players try to win the bid with lower drug price or just give up the market shares?
Most of the winning products are oral medicines, and there are corresponding generic drugs on the market. What are the impacts of the “4+7” policy on chemical medicine injections and biologics?
What can hospitals do to reduce losses, or say, hospitals could no longer pocket any grey incomes?
Since 11 November 2018, the National Essential Medicines List has been officially linked to the consistency evaluation for generic drugs. Drugs that have passed the evaluation will be included in the list prior to other drugs, and drugs fail to pass the evaluation will be removed from the list. There is no time limit for the consistency evaluation of drugs on the National Essential Medicines List. As the end of November 2018, 112 varieties of drugs passed the consistency evaluation, and 90 are among the 289 generic drugs. Can you comment on this?
In the past, the payment period was quite long. As the details of “4+7” policy have yet to come out, some people think the policy may not efficiently shorten the payment period. What’s your view to this?
Generic drug manufacturers have just poured great money into completing the consistency evaluation, and now “4+7” drug centralised procurement policy further reduces the profit margins of them. What’s your view on the impacts caused by the “4+7” policy on domestic generic drug manufacturers?
Thanks to the low price, home-made generic drugs are likely to replace imported drugs. In the long run, do you think the “4+7” policy is favourable for generic drug manufacturers or not?
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