China’s policy of slashing drug prices ramps up pressure on global pharma firms

As China pushes ahead with its policy of extracting price cuts from pharmaceutical manufacturers in exchange for access to its vast market, it is increasingly putting pressure on the profit margins of foreign and domestic drug manufacturers. Some drug firms are finding themselves cut out of the market altogether.

Since late 2018, China has been squeezing pharmaceutical manufacturers for massive discounts on their products, with the goal of ensuring its population wider access to quality drugs. In the first round of re-negotiating supply contracts for its public hospitals, generic drug manufacturers undercut their global peers, resulting in price drops of more than 50% for some popular drugs.  In November 2019, in the latest round of bidding on contracts with the public hospitals, drug manufacturers agreed to a 61% average price drop for 70 drugs that were added to the reimbursement list. That means Chinese consumers and patients are getting pharmaceuticals at record-setting low prices. But it could cause hardship among pharma companies who have to spend big to develop new treatments.