Chinese pharmaceutical stocks plunge on bigger than expected price cuts of generic drugs on compulsory bulk tendering
- The new procurement process is being tested in Shanghai first, before being rolled out to 10 other cities prior to a nationwide roll-out
- The 11 cities covered in the pilot project make up between 30 per cent and 50 per cent of drugs used in China
The stocks of China’s pharmaceutical producers were hammered on Thursday, on concern that their profitability will be slashed by a new government procurement process for generic drugs.
The price of Entecavir, an antiviral medication used to treat hepatitis B – the principal product of Hong Kong-listed Sino Biopharmaceutical – that won the most recent bid came in 90 per cent below the previous winning tender, according to Shanghai Securities News.
Irbesartan, a drug for treating hypertension made by Shanghai-listed Jiangsu Hengrui Medicine, was slashed by 60 per cent, the Chinese-language newspaper said.
“While the full procurement results have yet to be made public, the price cuts reported so far are bigger than expected, that is why certain affected companies have been hit particularly hard,” said CCB International analyst Natalie Chiu.
The new procurement process, led by the newly formed State Medical Insurance Administration, was promulgated to keep pharmaceutical prices low in an ageing society. Combined with mandatory clinical trials, the measure is part of the Chinese government’s effort to improve the quality of China’s drugs.
Shanghai was the first city to test the new procurement process, with 10 other cities scheduled to commence trails later this month before the system is rolled out nationwide.