China’s efforts to rein in high medicine prices seem to have hit warp speed. In the last two years alone, China has negotiated steep price cuts for imported treatments, updated the National Reimbursement Drug List (NRDL), and slashed tariffs to zero for more than fifty cancer treatments. Most recently, in November 2018, China launched the group purchasing organization (GPO) policy, a pilot centralized procurement scheme of generic versions of 33 off-patent originators in four municipalities and seven cities.

The GPO, though still in its relatively early stages, has already brought about drastic drops in the price of the 32 generic treatments in the pilot areas. The December 2018 bidding round resulted in an average price reduction of 52% in the four municipalities – Beijing, Chongqing, Shanghai, and Tianjin – as well as the seven cities of Chengdu, Dalian, Guangzhou, Shenyang, Shenzhen, Xi’an, and Xiamen – taking part in the GPO (or “4+7”) policy.

Overseas pharma companies have taken a pummeling during the bidding process under the GPO policy, reportedly winning over two contracts during the procurement round in late 2018. Meanwhile, competition from several generic versions of imported off-patent originators contributed to brutal price drops during bidding. This included the price of generic Lipitor falling to CNY6.60 per box of seven 20 mg tablets, equivalent to a price per unit of CNY0.94. According to our POLI data, the national retail price per unit for atorvastatin (20 mg) was CNY8.52 in late 2012. As China expands its pilot GPO policy, the patients look likely to be the main beneficiary of China’s aggressive pricing policies.

Or perhaps not. Despite China’s efforts, high drug prices and pockets of rapid drug price inflation (described by local media as “rocket-like”) reportedly persist across China in areas where the GPO policy has yet to be introduced. According to local media outlet PharmNet, there have been approximately 100 known instances of extremely rapid drug price increases in the past two years. For example, the price of a box of papaverine hydrochloride rose from its public tender price of CNY9.40 (USD1.36) to CNY369.90, and chlorhexidine rose from an initial price of CNY48.80 to CNY1,107.00. Over-the-counter (OTC) treatments are also affected: the price of vitamin A has reportedly increased from CNY280 per kg to CNY385-390 from April to May 2019.

However, as the Chinese authorities expand the GPO policy to additional regions, instances of sudden drug price inflation are likely to diminish, as an increasing number of generics pass the bioequivalence test required under the policy and drug prices are more intensely monitored.

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