For many years China has constituted the most lucrative market of generic manufacturing, but now the situation is changing. World-famous companies are forced to adapt to the new Chinese norms.
As the part of a major overhaul of the health care system, China is doubling down on efforts to lower prices for generic drugs in order to free up public funds to buy and develop new, advanced drugs. The nationwide campaign affects the profitability of both foreign and domestic pharmaceutical manufacturers.
The pilot project, launched at the end of 2018, has reduced drug prices by more than a half, while cheaper generic manufacturers have "sidelined" their global competitors.
As Beijing aggressively promotes reduction in the area of healthcare spending (by an average of 53 %) as a result of a reduction in wholesale purchases, the big companies are losing most of their contracts when facing with dumping competitors. These results inspired Beijing to expand the program across the whole country, after which prices fell by another 25%. The second round of contracting procedure for the supply of medicines to public hospitals was launched.
The analyst from ICBC says that for this time price reduction has been more significant than in the first round: the Government has added a price cap on each drug, and it has been estimated that the price caps were 95% lower than the current prices in China.