GSK, AZ hit with deep price cuts in China on key drugs

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China, like Western countries, is trying to figure out how to deal with soaring healthcare costs and like them is looking to lower drug prices as part of its effort. That is turning out to be bad news for AstraZeneca ($AZN) and compatriot GlaxoSmithKline ($GSK), which today saw deep price cuts imposed on popular drugs they sell in China.

China’s National Health and Family Planning Commission today reported it had slashed the price of AstraZeneca's lung cancer pill Iressa by more than half to 7,000 yuan ($1,069) from 15,000 ($2,292), Reuters reports. It also reduced the price of Viread--a Gilead Sciences' hepatitis B drug that GSK sells in China--by about two-thirds, to 490 yuan ($75) a month from 1,500 ($229). The agency said at the lower price for the hep B drug, Chinese patients will no longer have out-of-pocket costs. It will be fully covered by Chinese reimbursement policies.  

Western drugmakers were not alone in feeling the pain. China's Betta Pharmaceuticals had the price of its lung cancer med Icotinib reduced to 5,500 from 12,000 yuan a month, the news service said.

Paying for healthcare has become a growing issue for China. As the standard of living increases, so do expectations from citizens that they have access to better healthcare. Because of their cost, many patients can not afford lifesaving drugs for diseases like cancer and hepatitis C.

According to a recent Bloomberg report, Chinese citizens pay up to 77% of all private healthcare costs compared to the U.S., where consumers pay 22%. In the case of cancer patients, they often face drug prices that range from 80% to 120% of what they run in the U.S., the report said.

Today's announced price cuts come as GSK is already dealing with plummeting sales in China as it reorganizes there following a bribery scandal several years ago. GSK in Q1 reported sales in China fell 28% after currency adjustments--a faster drop than the end of 2015. The company blamed its ongoing restructuring program in the country as well as cost pressures in tenders and reimbursement.

AstraZeneca, on the other hand, continued to rack up double-digit gains in the country in Q1, be it at a slower pace than last year. It reported sales in constant currency up 11%, a drop from a 15% pace in the fourth quarter.

- read the Reuters story

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