China expands centralised drug procurement scheme nationwide

Further to the implementation of its centralised procurement regime in 11 major cities in November 2018, China recently expanded this regime to 29 provinces and four municipalities across the country in a bid to control drug prices and improve patient accessibility to high quality medicines. This regime will not be expanded to the areas of Hebei, Fujian, Hong Kong, Macau and Taiwan.

The regime was officially initiated when China's Joint Procurement Office issued the Medicine Centralised Procurement Document (No. GY-YD2019-1) on 1 September 2019, and the deadline for pharmaceutical distributors to submit bidding documents to participate is 24 September 2019.

The procurement list issued for the previous 2018 procurement regime included 31 drugs. The list for the new 2019 regime has removed six drug types from the previous list, and includes 25 medicines in total. The six drug types removed include Azithromycin tablets, Azithromycin injection, Amoxicillin tablets, Tramadol tablets, Alfacalcidol tablets and Captopril tablets.

Although the new regime is similar to the previous 2018 plan, the 2019 system will include the following changes:

• Applicants eligible to participate have been expanded to include drug Marketing Authorisation Holders;
• Each applicant must guarantee an agreed-amount supply of its product during the procurement term;
• In the event that one or two applicants have been selected to provide a drug type, the procurement term will be one year; and
• In the event that three applicants have been selected to provide a drug type, the procurement term could be extended to two years.

During the previous 2018 regime, only two multinational firms won tenders to participate, with domestic firms representing all other 23 tender winners, a situation credited with keeping drug prices in the procurement process sharply reduced.

To be competitive in the new regime, both multinational and domestic manufacturers are facing the dilemma of choosing between cutting profit margins and securing a large market. Given that the new 2019 procurement plan almost reaches the country’s entire market, multinational firms may need to re-consider their pricing strategy when bidding to participate. In the opinion of CMS, lowering prices to maintain or even expand its market may be a wise choice.

For more information on how to participate in China's new centralised procurement regime, contact your regular CMS source or one of the following local CMS experts: Nick Beckett, Daisy He.

See http://www.smpaa.cn/gjsdcg/files/file6256.pdf for the full text of the 2019 Medicine Centralised Procurement Document (in Chinese only).