Foreign drug makers lose pricing autonomy

09:45, December 02, 2010      

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The National Development and Reform Commission (NDRC) has begun cutting the prices of the original research drugs, or ORDs, that are mostly made by foreign ventures in China.

  Prices of 17 kinds of drugs would be reduced starting December 12, including a variety of antibiotics and cardiovascular drugs. The average price of these drugs will be reduced by 19 percent, according to an announcement by the NDRC.

  Prices of some drugs will be reduced by as much as 30 percent. For example, captopril, a drug for hypertension and congestive heart failure, produced by a joint venture of the US-based Bristol-Myers Squibb, will be reduced to 22.10 yuan ($3.32) from 34 yuan ($5.10).

  Producers of original research drugs used to enjoy pricing autonomy. Some of those include the US-based Pfzier and Eli Lilly and Company, as well as British drug maker GlaxoSmithKline.

  The NDRC's move is expected to save consumers as much as 2 billion yuan ($300.16 million) annually, according to the announcement. It could also mean a fairer playing field for domestic drug makers.

  However, the R&D-based Pharmaceutical Association Committee, a non-profit organization representing more than 20 multinational pharmaceutical companies, saw things differently.

  Quality control, research costs and the management investment of domestic generic drugs vary considerably with original research drugs.

  With Chinesegeneric drugs prices at only 20 to 30 percent of the world's average, it is unfair to adjust prices of original research drugs according to generic drug prices, the pharmaceutical association said in a statement. Worsening the situation for foreign firms in general is the government's decision to levy the city maintenance and construction taxes on all foreign companies from Wednesday.

  But some analysts said there may still be a silver lining.

  "It will be easier for foreign firms to move into second- or third-tier cities with the new lower prices," said Guo Fanli, an industry analyst with CIC Industry Research Center.

  With the new pricing and tax system, many are concerned that foreign firms will lose interest in investing in China. But Guo doesn't believe this will be the case in the pharmaceutical industry.

  "Foreign firms can't afford to lose the huge Chinese market," Guo said. "And with opportunities to get in at the entry level, they should see more incentives to invest in China in the future."

Source: Global Times


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