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Kandy Wong

The central government plans to set up a mechanism that  will regulate the pharmaceutical industry and slash prices for antibiotics by as much as 40 per cent, according to industry sources.

In a move that  will have a serious impact on the profitability of mainland and Hong Kong-listed drug firms, the National Development and Reform Commission  aims to set up a review of a two-year regulatory mechanism that  will examine the prices of drugs - such as antibiotics, anti-cancer drugs and Chinese herb medicine - that come under China's medical insurance scheme.

The results of the review are due to be released in November.

'The government will firstly cut prices for antibiotics and anti-cancer drugs,' one  source said.

'Drugs with patents or that are made in China will not be directly affected but generally speaking the price  will be cut by 40 per cent for antibiotics which will have the largest decrease, while prices for anti-cancer drugs will be decreased in the range of 3 per cent to 30 per cent,' an industry source said.

Beijing's aim is to encourage local drug manufacturers, while at the same time  consolidate the market by shutting down smaller  drug firms. The latest round of regulation is the second since 2001.

'Drug firms with a core business of antibiotics and non-patent products will be under pressure this year,'  the source said.

According to the official Xinhua Net website, a senior  official at the commission said the government wanted to regulate drug prices, requiring companies  to declare price rises of more than 5 per cent.

Price rises above this amount would not be approved without a sound reason, the official said.

Meanwhile, first-quarter turnover and profit for three Hong Kong-listed  drug firms - Sino Biopharmaceutical, Guangzhou Pharmaceutical and China Shineway Pharmaceutical Group - remain stable.

'After the government cuts the price of antibiotics, the next round will be Chinese herb medicine at the end of the year. That policy might affect our profitability and be reflected in next year's profit,' a spokesman for Guangzhou Pharmaceutical said.



Price cuts will hurt profits at drug firms