Domestic and foreign manufacturers of pharmaceuticals have united to protest against a unilateral price cut decreed by the central government that took effect this month, saying that it will reduce their budgets for research and development and force many firms into the red. The State Development Planning Commission has ordered an average price cut of 30 per cent in 24 varieties of antibiotics, including Amoxicillin, in 400 forms and package sizes, that will save consumers 3.5 billion yuan. The biggest cut is 56 per cent. 'Sales and profits from these regulated medicines will be greatly affected,' said a spokesman for Wyeth Pharmaceutical's joint venture in Shanghai. Like other joint-venture companies, including GlaxoSmithKline, Wyeth has sent a proposal to the government asking that it should be allowed to set the prices of its products. Domestic firms are also angry. 'This change has caused great losses to domestic manufacturers,' said Wang Jingxia, secretary-general of the China Association of Pharmaceutical Commerce. 'It should be enterprises and not the government that sets the price of medicines.' The system under which most Chinese buy medicines is a recipe for high prices. A patient can claim reimbursement for his medicine, from the government, employer or insurance company, only if he buys it in a hospital. Such sales account for more than 80 per cent of sales of medicines in China. For their part, hospitals depend on sales of medicines for 80 per cent of their income. Everyone has an interest in keeping prices high. To combat this, the government has since 2001 ordered five price cuts, covering 1,000 varieties and saving the consumer a total of 30 billion yuan. These cuts have badly hit domestic manufacturers, according to Yu Mingde, executive chairman of the China Association of Pharmaceutical Enterprise Management. 'More than one-third are in the red and they have no money to invest in R&D, to compete with foreign companies.' Manufacturers also say that consumers will not receive the benefit of the price cuts because hospitals, drug stores and dealers will not sell many of those with the lower prices.
