Drug pricing concerns due to new govt program drive down pharma stocks in China

By PharmaCompass

2018-12-13

Impressions: 176 Article

In China, the government is driving down generic prices through a new procurement program. The move has set the Chinese pharmaceutical stocks plummeting, erasing US$ 26 billion in market value over two days.

Last week, the MSCI China Health Care Index headed for its biggest two-day drop since 2005.

The procurement program is designed to control medical costs by getting 11 major cities, including Beijing and Shanghai, to combine their purchasing from drug companies. The winner of the tender process for each of the 31 drugs will become the sole supplier for hospitals in all of those cities, but at a much reduced price from before.

Domestic and foreign pharmaceuticals have opposed the centralized procurement plan since it was announced last month. Moreover, they are also of the view that relying on one supplier for each drug could potentially cause quality and supply issues in the future.

While the government said this was a pilot program, analysts expect centralized drug procurement to be the new normal for the generics market in China.

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