China bulk purchasing agreements add pressure on pharma firms to lower prices

A growing number of Chinese cities are joining its successful bulk drug purchasing program, which has put pressure on pharmaceutical firms to cut prices since it first went into effect last year. That is likely to decrease market share for individual firms, increase competition for contracts and lead to price drops for their products.

Manufacturers are already in fierce competition for the vast Chinese market under the program that joins together eleven major Chinese cities, including Beijing, Shanghai and Guangzhou, to buy bioequivalence qualified generic drugs.

Under the program, China plays its greatest bargaining chip, the sheer volume of demand from its population, to glean the best prices from drug makers. Dozens of firms are invited to bid for contracts to supply the drugs. The winner supplies the medication to hospitals in the cities who are participants in the program.