AstraZeneca's Pulmicort, Bayer's Xarelto among big losers in China's largest round of price cuts on generics

AstraZeneca can kiss its Pulmicort blockbuster sales rebound goodbye.

The aging asthma inhaler was among originator drugs that lost valuable government contracts to cheap generics during China’s latest price-cutting scheme for off-patent drugs, known as the volume-based procurement (VBP) program.

All told, drugmakers slashed prices by an average 56%—across 61 molecular entities—to get products into the program in the latest round. As expected, the majority of winners (Chinese, PDF) were local manufacturers, with Sanofi, GlaxoSmithKline, GE Healthcare and Mitsubishi Tanabe among the few foreign drugmakers to show up in final roster.

Through the years, Pulmicort has yielded U.S. market share to newcomers such as AZ’s own Symbicort and biologic drugs. It’s still collecting major sales from emerging markets, with China front and center in that category.

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In 2020, Pulmicort brought in $996 million in sales, with 80% coming from emerging markets. AZ attributed the drug’s 32% decline last year—versus 14% growth in 2019—to the effects of COVID-19 in China.

Just as AZ is seeing some recovery as COVID eases, losing its business in China will likely deprive Pulmicort the chance to return to blockbuster status.

Before the VBP, AZ’s originator drug claimed more than 90% of market share in China, according to PharmCube, a local pharma data intelligence service provider. Under the VBP program, the government is now offering 70% of the tendered market to four generics companies.

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The VBP program, first introduced in 2018, earmarks a large amount of business from China’s public hospitals to drugmakers in exchange for hefty discounts. Losing a place in the program means a company has to fight for the remaining share in the public system and the much smaller private market.

Although the policy doesn’t specifically target Western pharmas, VBP negotiations have in the past caused serious damage to the established medicines businesses at Bayer, Pfizer, Sanofi and AstraZeneca, even for winning companies who have to offer steep discounts.

Sales of Bayer’s diabetes med Glucobay—sold in the U.S. under the brand name Precose—plummeted last year after the German company cut its price by 90% to get into the scheme.

This time, Bayer’s blockbuster oral blood thinner Xarelto was included in the aggressive discounting program after it lost exclusivity in China last year. More than 20 companies vied to earn Xarelto business in the most cut-throat bidding in this VBP round. Contracts of different strengths of the drug are now being awarded to over 10 developers, which will divvy up 80% of the tendered public market by VBP rule.

RELATED: Bayer unveils first look at its post-Xarelto, post-Eylea life—and it's better than expected

Officials designed the VBP program to free up resources spent on old drugs to fund innovative therapies. Foreign pharmas are following that direction, pivoting away from legacy products to newer offerings in China.

AZ, for example, has been able to get its major earners onto China’s national reimbursement drug list. These include blockbuster cancer meds Tagrisso and Lynparza both in the first-line setting, and most recently COPD drug Breztri.

The latest round marks the fifth—and largest—of its kind so far. The 62 meds included for bidding represented CNY 55 billion ($8.5 billion) worth of spending through the public health system last year, local media report, citing an official with the program organizer. Thanks to the price cuts, the new contracts are expected to save the Chinese government CNY 25.5 billion in medical expenses, the official said.

The new additions take effect October and will cover one to three years for different drugs.