Drugmakers Cut Prices 61% to Get on Coveted China List

(Bloomberg) -- Drugmakers including AstraZeneca Plc and Roche Holding AG agreed to cut prices of some of their newest innovative drugs in China by an average of 61% as the government expanded the number of treatments covered under national insurance.

Some 70 new therapies were added for coverage by China's state-run medical insurance fund after months-long negotiations over prices, according to a notice on the National Healthcare Security Administration's website on Thursday.

The drugs that made it onto the list included AstraZeneca's roxadustat, an anemia medicine that was approved in China ahead of the U.S., and Roche's lung cancer treatment alecensa.

Other western medications added were hepatitis C treatments from Gilead Sciences Inc. and Merck & Co., and AbbVie Inc.'s Humira injection pen for rheumatoid arthritis. There are more than 2,700 medicines on the list after the latest adjustments.

Both domestic drugmakers and multinational giants are eager to get their treatments on the list even at steep discounts in order to gain access to China's $132 billion pharmaceutical market, the world's second-biggest. Drugs on the list are almost fully paid for by China's 2.34 trillion yuan ($333 billion) national medical insurance fund. The list has been annually updated with new entries since 2017, when Beijing accelerated its campaign to bring the best drugs to its growing middle class as quickly and cheaply as possible.

China Is Striving for the World's Best, Cheapest Health Care

Prior to 2017, the list was updated sporadically and only every several years. But since a regulatory revamp starting around 2016, China has sped up drug approval reviews to meet consumer demand and included more novel, imported therapies on the reimbursement list. China is home to the world's most diabetes patients, nearly 4 million new cancer patients and an aging population.

The latest negotiated price cuts made the imported drugs “the cheapest in the world,” the notice said. Three hepatitis C treatments dropped prices by an average of more than 85% while tumor and diabetes therapies fell by an average of 65%.

Share Reaction

Chinese drugmakers' shares slumped Thursday due to the magnitude of the price cuts. CSPC Pharmaceutical Group Ltd. slipped as much as 2.4% and Innovent Biologics Inc. fell as much as 3.2% before paring losses in afternoon Hong Kong trading.

“The drugmakers are falling on the news about the national reimbursement list. It shows that they need to lower prices meaningfully to be able to join the list,” said Kelvin Chen, an analyst at Bocom International.

The national medical insurance fund, which covers 95% of 1.4 billion Chinese, is demanding deep price cuts to avoid bankrupting the safety net.

That in turn has put pressure on foreign drugmakers. New drugs are often brought to the China market at prices lower than they are sold in the West, but still face competition from a growing legion of Chinese biotech firms developing similar drugs that can be sold even cheaper.

Global pharmaceutical companies' older drugs that have gone off-patent are also facing price cuts. In a separate national campaign in which China's public hospitals bulk-buy generic medications, prices have been driven down by as much as 90%.

--With assistance from Jeanny Yu.

To contact Bloomberg News staff for this story: Dong Lyu in Beijing at dlyu3@bloomberg.net

To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Jeff Sutherland

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With assistance from Bloomberg