China’s None-Too-Subtle Play: Control Procurement Prices On “Essential” Drugs

Over 60 companies, most of them multinationals like Baxter, Merck and Astellas (to select just three, as an example of the varying sizes) have been informed that an agency of the Chinese government is looking into the way the companies price what China deems as essential medicines.

This should be rightly seen through the lens of political jaw-boning — and not enforcement, for any bad act — as the Chinese government is far and away the primary payer, for all medicines delivered there. It makes sense that the agency would — from the Chinese cultural perspective — say that as to “essential” medicines, the profits ought to be modest, for the drugmakers.

[These general Chinese pricing reviews should not be confused with a specific investigation now underway as to GSK’s marketing practices for Botox in China (H/T Ed Silverman). That — according to the Chinese agencies — is allegedly ripe with “bad acts” aromas. It may or may not actually be, IMHO.]

In any event, here is a bit of the Bloomberg story, out this morning — do go read it all:

. . . .Officials from the center will visit the companies between July and October, according to the statement. GlaxoSmithKline, Merck, Novartis, Baxter and Astellas Pharma Inc. are in the cost part of the review, along with a number of Chinese drugmakers, it said. . . .

“This isn’t surprising as drug prices are often under scrutiny from the NDRC,” said Jason Siu, a health-care analyst with RHB OSK Securities Hong Kong Ltd. “It makes sense for them to try to keep procurement costs low. . . .”

I suppose it is remotely possible that the Chinese officials will suggest that local Chinese drug manufacturers might make these essential meds available less expensively, if China were to nationalize the intellectual property behind them. And that, afterall, is a power other agencies of the Chinese government retain, to this day.

That would be an extremely unfortunate turn of events, for the multinational pharmacos, but I suspect the Mercks and Baxters of the world will head that effort off at the pass — with some modest price concessions, during the reviews. We will keep you posted — as ever. And happy return to the mid-summer’s office-week!


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