Pharmaceutical companies face steeper price cuts in China as country expands drug bulk-buying scheme nationwide: report

China has expanded across the country a drug procurement programme aimed at reducing the cost of generic medicines, a move that may force global pharmaceutical firms to slash their prices by half in order to maintain sales to the country's public hospitals, Bloomberg reported Tuesday. In the first round of bidding last December, when the pilot programme launched in 11 major Chinese cities, prices on certain drugs had dropped on average by 52%, while the latest round of winning bids are a further 25% lower on average.

The news follows a recent report that the scheme would be expanded nationwide under revised terms. The initial programme called for a single company to be chosen as the winner for each tender. However, under the revised scheme, the lowest bidder for each generic drug, plus up to two other companies willing to match the price, would share the contract to supply 70% of the targeted products to public hospitals.

Regarding specific treatments, analyst Umer Raffat of Evercore-ISI said the price of Pfizer's cholesterol drug Lipitor (atorvastatin) was reduced 74%, while the company's hypertension treatment Norvasc (amlodipine) will be cut by 60%. "These two drugs are the most important part of [the] Pfizer-Upjohn China business that was sold to Mylan," Raffat noted.

In addition, Qilu Pharmaceutical submitted a bid in this latest round for AstraZeneca's cancer drug Iressa (gefitinib) that was 50% lower than the branded firm's offer. In the first round of bidding last year, AstraZeneca had offered a 76% discount on the therapy in its winning tender.

Commenting on the news, Capital Securities analyst Wang Ruizhe stated "even foreign makers, the originator of these drugs, tried to submit prices in this round of bidding that's close to the level of their peers." The analyst added that "firms are really squeezing their prices in a sign of intensified competition in the market."

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