Since China first announced its ground-breaking volume-based procurement (VBP) pilot program to reduce drug expenditures in 2018, the world’s second-largest pharma market has steadily expanded the 4+7 pilot program into a regular national and provincial exercise, lopping off over a billion dollars from the top lines of both multinational and domestic pharma companies alike.
Unsurprisingly, the winners by far were local Chinese manufacturers…
On 3 February 2021, Chinese health authorities released the results of the fourth round of VBP which saw 45 products listed for tenders. Initial estimates from GBI (source in Chinese) placed the annual savings from this VBP round at CNY 12.4 billion (USD 1.9 billion), with the average price decrease being 50 percent – compared to 72.2 percent in the third VBP round in Q3 2020 – and the highest price decrease coming in at a whopping 96 percent (regional player E Mei Shan Tonghui Pharmaceutical’s parecoxib sodium, a painkiller).
Unsurprisingly, the winners by far were local Chinese manufacturers, with first place going to Yangtze River Pharmaceuticals, which boasted seven winning bids, followed closely by Qilu Pharmaceuticals, CSPC Pharmaceutical Group, and Sino Biopharmaceutical, all with six winning bids each. Fosun Pharma rounded out the top five with five winning bids.
The losers? Dozens of other companies, most notably Novartis and Boehringer Ingelheim, both of which lost in all five of the tenders they each participated in. Fellow MNCs Pfizer and AstraZeneca can commiserate, as they too lost out in all of their tenders (three each). Only two MNCs managed to slash prices of their originator drugs sufficiently to triumph despite cutthroat local competition: Sanofi’s antipsychotic Solian and Fresenius Kabi for its intravenous anaesthesia Propofol MCT.
While the figures may seem distressing, particularly for MNCs, the reality is that, over two years into the implementation of VBP, pharma companies (should) have more or less adapted to the new paradigm in the Chinese market: bring your best innovations or brace yourself for a battering.
For example, Novartis probably received the VBP news with a relatively sanguine attitude as just a week before, the Swiss pharma giant announced that its China sales had – in spite of VBP and, oh, a global pandemic – grown by double digits in 2020. In addition, CEO Vas Narasimhan told Chinese state media Xinhua that the goal “is to double [Novartis’] business in China by 2024 to over USD 4 billion in sales … driven by both growth in [their] innovative medicines pharmaceuticals portfolio as well as [their] oncology portfolio.”
Nevertheless, for the MNCs that cannot pivot away from their legacy products quickly enough, the future holds more grief and bloodshed for their China revenues, as it is patently clear that VBP is here to stay.
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