Drug bidding abandonment trend: foreign companies up to 92.3%

According to reports, during this year's drug bidding process in Zhejiang, there was a widespread phenomenon of pharmaceutical companies abandoning bids, with foreign-funded pharmaceutical companies having a higher abandonment rate, with an overall average abandonment rate of 60.5% and 92.3%.

The Zhejiang Provincial Drug Procurement Center previously released a message about "carrying out low-priced collection of related products", which has once again made some pharmaceutical companies, especially foreign companies, feel that "the whole person is not doing well" after accepting the price reduction. A pharmaceutical company participating in this quotation revealed to reporters that the procurement requirements of pharmaceutical companies in Zhejiang are relatively low. If they do not accept it, they can only bid farewell. If the price confirmed by the previous decrease is lower, the lower price will be adopted. This also means that in the second drug bidding in Zhejiang Province, some drugs will generate new ones. This has led to a abandonment rate of 60.5%.

Previously, the rising drug prices have also become a hot topic of discussion this year. More than 90% of drugs now have a lot of room for price reduction, and many companies have also cut prices by 50%. There is no problem with this. Some people also expressed that there is considerable room for price reduction of drugs, and both pharmaceutical companies and hospitals have the possibility of self reporting drug price reductions. Lowering drug prices is imperative, and pharmaceutical companies have also experienced a majority of abandonment of bids despite feeling relatively unprofitable. A well-known foreign company executive told reporters that their company has held such a seminar on whether to abandon the bid, and there was a lot of controversy at the meeting. The business owner felt that the profit was not significant, so he temporarily abandoned the bid.

Hunan, Zhejiang, and other regions have seen continuous large-scale abandonment of drug bidding, what are the hidden reasons for pharmaceutical companies? Is this phenomenon a coincidence or a trend?

In January of this year, Hunan Pharmaceutical Tendering conducted price reductions ranging from 10% to 50% on 26440 product specifications within its scope, causing foreign pharmaceutical companies to abandon their bids. At the same time, during the bidding process for drugs in Hunan, Shaoxing Hospital in Zhejiang made price adjustments and included 14 foreign drugs with higher prices in the scope of suspension or restriction of use. Actually, since last year, there has been a downward trend in drug bidding prices. In 2014, health departments in various regions generally lowered the prices of drugs within their scope by about 25% in bidding. At that time, most pharmaceutical companies analyzed that perhaps after this significant general reduction, drug prices could operate stably for a period of time. But just one year later, the price dropped sharply again.

Faced with such a sharp decline, foreign pharmaceutical companies have abandoned their bids one after another. Novo Nordisk has abandoned bids for 15 varieties, while Squibb has abandoned bids for 13 varieties, Pfizer has abandoned bids for 34 varieties, and so on. In addition to Hunan, there have also been rumors of bidding price reductions in Zhejiang and Liaoning provinces.

For foreign pharmaceutical companies, the discomfort goes far beyond this. In 2015, the policy of canceling separate pricing for original drugs may be introduced, which will be a fatal blow to foreign pharmaceutical companies. The so-called 'original research drugs' refer to imported drugs that have exceeded their patent period. For many years, China has set separate pricing rules for original drugs, and the price difference between these drugs and domestically produced generic drugs can range from several times to tens of times. In 2015, this rule may be changed and replaced with a market pricing mechanism. In addition to significantly reducing prices for foreign-funded enterprises, the drug bidding in Hunan Province has also made such a drastic reduction for local enterprises, with a reduction of up to 50%.

Compared to foreign pharmaceutical companies, local enterprises have been accustomed to running volume at low profit margins for many years, so even in the face of such huge price reductions, there are few companies that abandon their bids. Therefore, the market relinquished by foreign investment this time is a good opportunity for local enterprises to expand their market. According to a survey in the pharmaceutical industry, the proportion of foreign-funded drugs in the above hospitals reaches about 70%. Since last year, with the increase in the number of foreign companies abandoning bids and local enterprises winning bids, the proportion of foreign drugs has decreased to around 60%. This time, with the implementation of the policy of "not leaving the county for serious illnesses" called for by various regions, most patients in second - and third tier cities have been left in county-level cities for medical treatment. County level cities like Ersan have always been the main market for domestic pharmaceutical companies, with domestic pharmaceutical companies accounting for 70% -80% of the market share.