From the pages of Drug Industry Daily …
China Investigating Drug Pricing At Domestic, Multinational Firms
The Chinese government is conducting a review of drug pricing and manufacturing costs at selected domestic and international companies, with an eye on making healthcare more accessible to its people.
The review, by the National Development and Reform Commission (NDRC), will look at drugmakers’ data from 2010 through 2012, including corporate audit reports, sales agreements and shipping records. Importers will also be asked to provide information about border control costs such as customs clearance, quarantine fees and storage fees, a July 2 NDRC notice says.
According to Citi Investment Research analyst Richard Yeh, the inquiry will target about 60 drugmakers — including GlaxoSmithKline, Boehringer Ingelheim, Fresenius Kabi and Sandoz — and focus on prices of drugs recently added to the 2013 essential medicines list and preferentially priced branded generics from multinationals.
“Our checks also suggest that the survey may not necessarily lead to price cuts on the surveyed drugs or imply another round of price cuts, but likely reflects the NDRC’s intention to build a more optimized drug pricing regulation system and to provide a basis for future price cuts” on exorbitantly priced drugs, Yeh writes in a research note.
Helen Chen, head of L.E.K. Consulting’s China life sciences practice, said the exercise could be useful if the NDRC’s aim is to educate itself about the cost of providing quality drugs.
“The key issue here, though, is whether they understand the cost of drug quality goes beyond the simple manufacturing [cost of goods sold],” Chen said. “I hope NDRC’s intention is not just tallying ex-factory price and mandate [sic] a small allowable markup as they had proposed for device manufacturers.”
Peter Pitts, president of the Center for Medicine in the Public Interest and a former FDA associate commissioner, also sounded a note of skepticism. “It’s important for Beijing to understand and appreciate that lower cost does not necessarily lead to broader patient access,” he told DID Wednesday. “For example, the 100 top drugs on the World Health Organization’s essential drug list are all off-patent and yet there is still little or no access to them in China.”
Also of concern, Pitts added, is that the national government’s control over manufacturing issues in the provinces has proven to be spotty, despite recent regulatory advances at the ministry level.
The survey comes amid an ongoing effort by China to “establish a healthcare system covering urban and rural residents, and to provide safe, effective, convenient and affordable medical service,” as explained by then-President Hu Jintao in 2007.
Chen noted that, in the early 2000s, the government had to force 10 large drugmakers to produce a list of basic medicines that companies had stopped making because the prices were too low to be profitable. According to Yeh, the NDRC released a guideline for drug ex-factory price surveys in November 2011 and began creating a mandatory ex-factory drug price reporting system in September of last year.
