Bayer notes pharma price pressure in Japan, China


Efforts to cut drug reimbursement and tender costs in Japan and China are being felt at Bayer HealthCare, executives said on the April 26 first quarter earnings call--causing the company to keep a sharp eye on costs and focus on top-selling products.

Bayer had signaled over-the-counter integration issues from two acquired portfolios in China in its fourth quarter call at the start of the year as adding to costs, with then incoming CEO Werner Baumann noting the company was working through the management tasks.

On the first quarter call Dieter Weinand, head of the pharmaceuticals division, discussed the effect of wide-ranging healthcare reforms in China--which are expected to accelerate in the second-half of the year.

This week, China announced plans to subsidize efforts to wean public hospitals from markups on drugs sold on site to offset revenue shortfalls that could crimp other services. The subsides will extend cover 100 new hospitals under a program aimed at ending markups of 15% or more of drugs prescribed and sold on site.

China has worked on several fronts to centralize tenders for public hospitals as well as streamline tender rules among provinces, with companies like Bayer now focused on cost management and top products to ride out the changes.

"We have previously stated that we will be very prudently managing our expenses, focusing our resources on the greatest value drivers," Weinand said.

He also noted that applies to Japan, where a cost-cutting review by the government every two years took effect April 1, which Weinand said led to a "price decrease of 6% to 7% overall range for the portfolio. That is in the high double-digit million euro range impact."

Reimbursement in Japan was a double-whammy this year for many drug firms operating there, with price cuts for widely prescribed drugs by Japan's Central Social Insurance Medical Council--known as Chuikyo--reaching as much as 50%. In addition, the every-other-year price-cut exercise sought savings of $1.5 billion.

Bayer Chairman Marijn Dekkers on the call did note Japan was still a strong market for hemophilia A therapy Kovaltry and that the company also gained a marketing nod for Xofigo in the quarter.

- here's the release from Bayer