Free Pricing Of Drugs To Benefit Domestic Pharmaceutical Firms
BMI View: The pharmaceutical industry will benefit from China's new proposal to allow market pricing of common but essential drugs in short supply. Domestic firms in particular stand to gain, as market pricing will help to improve profit margins. However, we highlight that the policy may only be temporary and that the country's overall aim to provide affordable healthcare may limit its scope. Consequently, we are maintaining our forecast for China's pharmaceutical market.
Eight departments of the Chinese government, namely the National Health and Family Planning Commission (NHFPC), National Development Reform Commission (NDRC), China Food and Drug Administration (CFDA), Ministry of Finance (MOF), Ministry of Industry and Information Technology (MIIT), Ministry of Human Resources and Social Security (MHRSS), and the Ministry of Commerce and State Administration of Traditional Chinese Medicine (SATCM), have released a statement announcing a policy that will secure the supply of commonly used low-price drugs.
The statement revealed that since the second half of 2013, some patients suffering from hyperthyroidism have reported a shortage of Tapazole (methimazole). Mao Qun'an, a spokesperson for the NHFPC, stated that the essential drug system was somewhat to be blamed for the supply shortages. BMI has highlighted previously that various provinces enact their own tender system regulations, which have resulted in price wars.  Given the potential for increased volume sales through essential drug listings, we believe that similar price wars may have caused a fall in drug prices, making it difficult for manufacturers to produce these essential drugs, and resulting in shortages.
|Strong Growth Potential|
|China Pharmaceutical Expenditure (CNYbn)|