Drugmakers facing new pricing landscape in China

The issue of US drug pricing and what government action might be taken to lower prices are getting as many headlines as ever at the start of 2019, but China is currently providing more striking evidence of action on cutting drugmakers’ margins.

Governments of 11 cities are taking over procurements of drugs for their hospitals, Bloomberg reports, giving at least 60% of their orders for 31 mostly generic therapies to the best bidder.

The cities are able to bulk-buy these medicines together. This has prompted a price war that has brought down prices by 55% in cities involved in a pilot program, according to Bloomberg, and could signal an end to low-cost generics giving Chinese drugmakers margins of between 80% and 90%. These domestic firms frequently spend a third of their revenue on marketing but a tenth or less on R&D.