Chinese officials intent on 'Anhui model' for price cuts

As China's National People's Congress ends in Beijing, Chinese politicians are repeating their pledge to make healthcare more affordable. Unfortunately for drugmakers, that means officials are also pledging to adopt Anhui province's aggressive tendering system, which slashed prices by at least 30% on key drugs over the past year.

Anhui's drug-buying approach has attracted a lot of attention, from government officials impressed by the price cuts and from drugmakers wary of broader use. Already, some domestic pharma companies have had to slash margins to the bone--or even take a loss--to get Anhui's business. As Bloomberg notes, several have warned that their profits will drop because of the price cuts.

Multinational drugmakers have joined Chinese pharma companies in lobbying against a nationwide rollout of Anhui's tendering methods. Big Pharma has pinned growth hopes onto expansion in China, investing in facilities and partnerships to expand its presence in the country. Large-scale price cuts could threaten those aspirations. Think how disheartening it would be for drugmakers to find China as intent on cost-cutting as the Europeans are now.

Meanwhile, domestic companies are raising questions about the wisdom of forcing price competition among drugmakers, which could inspire companies to cut corners as well as prices. "They need to prioritize on guaranteeing quality first, rather than focusing on just prices, or this will be very unfair to China's drugmakers," Guo Guangchang, chairman of a company that controls Shanghai Fosun Pharmaceutical, told the news service.

Government officials have promised that the tendering system "has proved to be effective and able to guarantee the drugs' safety," Bloomberg reports. 

- read the Bloomberg story