China Expands Drug-Buying Program to Cut Costs for Patients

(Bloomberg) -- China is expanding its generic drug-procurement program to include an additional 33 drugs, pitting domestic and international drugmakers in a price war that could see Chinese players dominate.

Less than three months after China went nationwide with a pilot bulk-buying program for 25 medicines, the government on Sunday announced a second batch of 33 drugs treating everything from diabetes and infections to dementia.

Makers of generic and brand-name versions of the newly added drugs are required to submit bids by mid-January. The government has set a price ceiling and will allow more than four companies to supply as much as 80% of national demand for a certain drug for a maximum period of three years, according to an official statement.

China is changing the way it procures drugs in major cities as part of a grand overhaul to improve health care for the country’s 1.4 billion people. Driving down the price of generic, off-patent medication drugs is an important part of that plan.

The initiative has evolved to reward more companies. The pilot program, launched in December 2018, began with naming one company as the major supplier of a particular drug. When it was expanded nationwide in September, as many as three companies were allowed to supply as much as 70% of a particular drug to hospital.

The latest inclusion of more than four participating companies opens up greater opportunities to Chinese drugmakers that have passed the government’s quality consistency tests, an official stamp that assures the generic version is just as good as the brand-name drug.

The first round of the drug bulk-purchasing program, which combined procurement of 25 drugs across 11 Chinese cities in late 2018, yielded savings of 5.8 billion yuan ($829 million) in health-care spending, the government said earlier this year.

Foreign pharmaceutical giants ranging from Pfizer Inc. to Roche Holding AG have seen sales of their off-patent drugs tumbling as domestic drugmakers willing to sell generics at much lower prices took over the market.

The generic bulk-buying program has also forced global players to shift away from relying on off-patent drugs for most of their China revenue to bringing more of their novel therapies to the country, which is the world’s second-largest medicine market after the U.S.

©2019 Bloomberg L.P.

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