Want China? Get ready to wheel-and-deal on drug prices

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Bring on the discounts, China says. Former health minister Chen Zhu figures Big Pharma will need to give the government a break on drug costs, in exchange for access to a "huge market," Bloomberg reports.

In other words, drugmakers need to be prepared to sacrifice on price, counting on sales volume to make the discounts worthwhile. This may temper pharma's hopes for Chinese growth, but the country remains one of the fastest-growing drug markets on the globe.

Chen's recommendations go far beyond the government's ongoing price cuts on its list of essential drugs. That list just grew more than 50% to 317 from 205, BioCentury reports. It includes some basic cancer drugs now, as well as the usual primary care products.

Take, for instance, the deal Novartis ($NVS) made with Jiangsu province to temper the price on its cancer treatment Gleevec, which isn't on that list of price-controlled drugs. With the purchase of each Gleevec dose, the Swiss drugmaker will give the government three doses for free. And that brings down the cost of annual treatment to about $12,000, he said. In the U.S. Gleevec's wholesale price is about $77,000. Because Gleevec's Chinese list price is unchanged by the three-for-one deal, it won't trigger automatic price cuts in other countries that might peg their prices to China's, and it won't undermine Novartis' pricing power in established markets.

"If the cost is too high, maybe only a few percent of patients can benefit," Chen told Bloomberg. "If we can arrange an appropriate, acceptable, affordable price, then you can have a huge market."

So, it's a question of access to treatments. And as you know, that argument has spawned a series of Big Pharma losses in India. The government has ushered cheap copies of Bayer's cancer drug Nexavar onto the market, and is weighing similar compulsory licenses on several other cancer meds. Meanwhile, the patent office has yanked previously granted patents on several drugs, including Pfizer's ($PFE) Sutent and Roche's ($RHHBY) Pegasys.

Chen wouldn't rule out compulsory licensing in China, but he said they should be limited to "national emergencies" like an epidemic, rather than routine use of expensive drugs. "We keep the right of using this measure, but it has to be studied carefully," he told Bloomberg.

- see the Bloomberg story
- get the brief from BioCentury

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