China plans 40% price cuts on key drugs

Could pharma's yellow-brick-road rush into China turn out like Dorothy's trip to see the wizard? Rather than all-powerful drug-market growth, Big Pharma may pull aside the curtain to find a government price-cutter pulling levers. 

For the second time in two months, we're seeing reports that Chinese officials are planning to lower drug prices. This time, the National Development and Reform Commission is said to be planing a 40 percent cut on 658 medications, Bloomberg reports. And at least one analyst didn't sound too surprised. "Lowering the drug prices has been and will continue to be a trend," Capital Securities' Li Ying told the news service. "As the government wants to make medical care affordable to everyone, more price cuts are underway."

China slashed prices on a list of branded drugs last month, including some products made by Roche and Bristol-Myers Squibb, saying it would continue to bring down expensive drug prices. And as Bloomberg notes, China's Anhui Province cut an average of 50 percent off the prices of 852 drugs in September. Indeed, it was Anhui's move that inspired the NDRC's latest cost-cutting plan.

Drugmakers have been moving into emerging markets--particularly China--as an antidote to slowing growth in established markets. Price cuts in Europe have been dogging pharma this year, as are new Medicare discounts the industry agreed to as part of U.S. healthcare reform. But now China is joining the price-cut parade. Domestic drugmakers say the new cuts would price some of their drugs below cost.

Some drug companies--notably GlaxoSmithKline and Sanofi-Aventis--have adopted price-cutting strategies in the developing world to boost sales by boosting volume. But big price cuts from the government aren't necessarily part of the industry's emerging-markets growth plan. 

- see the Bloomberg story