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Negotiation of drug prices: exclusive pressure on traditional Chinese medicine

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Recently, the National Development and Reform Commission, the Health Planning Commission and the Ministry of Human Resources and Social Security jointly issued the "Notice on Printing and Advancing the Opinions on Drug Price Reform", announcing the cancellation of the pricing of most pharmaceutical companies, and the establishment of open and transparent patents and exclusive drugs. Multi-participatory negotiation mechanisms form prices. Price negotiations have been explored in China for many years. With the issuance of the above documents, the drug price negotiation mechanism will be formally established nationwide.


Although the official has not yet given ideas on the price negotiation mechanism, the interim version of the work plan may have revealed the main direction of future price negotiations, and the officials concerned have also expressed their views in public. According to the public information, the future price negotiations still have to adhere to the idea of ​​classified negotiation, and treat the patented drugs, public health special drugs, and exclusive varieties of traditional Chinese medicines in different forms and sub-subjects.


Judging from comprehensive information, drug price negotiations are expected to take the form of price-linked and unified prices. This means that products that have been used in large quantities, such as exclusive varieties of traditional Chinese medicines, may be more difficult to obtain sales while being subjected to price pressure. The increase in the number of foreign patents may result in a better balance between price cuts and increments.


The classification negotiation idea has been set

It is understood that the previous consultation papers on the “Pilot Work Plan for Establishing a Drug Price Negotiation Mechanism” have been issued in the past, which has formulated a framework for the construction of the main body of the negotiation, the negotiation of drug scope and promotion work.


Negotiate the implementation of classified negotiations, establish the main body of negotiation at the national and local levels, and adopt different negotiation methods for drugs of different attributes, and incorporate market share and clinical use needs into negotiation considerations. The negotiating products are concentrated in the fields of tumor medication, cardiovascular medication, medication, and public health medication.


National negotiating varieties, mainly for patented drugs commonly used in clinical practice, with reference to drug prices in Hong Kong, Macao and Taiwan and other countries, combined with the number of drugs used in hospitals, negotiated and negotiated prices by professional negotiating groups; and patented drugs in public health fields will be incorporated into AIDS and tuberculosis drugs. The procurement and supply model of public health projects, with budget negotiation, quantity negotiation, centralized procurement, centralized distribution, fixed-point institutions, and fixed-person use, negotiated and negotiated purchase prices by the China Center for Disease Control.


In terms of local negotiations, the main target is the exclusive production of proprietary Chinese medicines. The state-appointed negotiating institutions are commissioned by the state to determine the purchase price through negotiation and negotiation according to the level of local medical insurance financing, and to link with the medical insurance payment to promote a reasonable price range.


The contents of the above-mentioned documents are generally consistent with the public speeches of Sun Yang, deputy director of the Department of Drug Policy and Essential Medicines of the National Health and Family Planning Commission.


For the exclusive Chinese medicine variety, Sun Yang further revealed that the exclusive Chinese medicine is an important part of China's excellent traditional culture. It has the characteristics of stable quality, exact curative effect and fixed protection. Many of the Chinese medicines with large sales volume are exclusive medicines. More than 60 exclusive Chinese medicine products in the 2012 edition of the Essential Medicines List may also be included in the negotiations. The specific negotiation method can be negotiated jointly across provinces or regions or negotiated in the product field, and the national price will be unified.


From the version of the program circulating and the speeches of relevant officials, it may be possible to judge the general direction of some key content of drug price negotiation: First, whether it is negotiation at the national or local level, the negotiated price may eventually become the price of the drug, at the national level. The results of the negotiations are unified across the country, and the local level is the province or the consortium; the second is that the negotiating varieties will be selected by the negotiating body and will be promoted in the form of quantity and price linkage.


If the above analysis direction is correct, compared with the current second bargaining environment, the exclusive variety competition environment is undoubtedly much easier, but there are many uncertain factors for whether it is really good or not.


At the national level, the varieties included in the negotiation category are basically considered to be clinically essential products, which are in line with the characteristics of monopoly supply, high price, and exact curative effect, and are not in the scope of medical insurance. However, whether it is a national negotiation or a local negotiation, the high-level government promotes the negotiation system, and the price reduction and the subsequent sales expansion are factors that enterprises must consider.


According to this logic, from the perspective of the current pharmaceutical market, products that have been used in large quantities may be included in the scope of negotiations, and products that are not widely used but are lucrative will become big profits.


According to the speech of the relevant officials, it is inevitable that the exclusive varieties of Chinese medicines will be included in the negotiations, including the exclusive varieties in the basic medicine list. All aspects of the data also show that since the implementation of the 2009 edition of the basic drug list, the exclusive varieties of local base drug purchases accounted for a large proportion in the public data of Hebei, Anhui, Inner Mongolia and other provinces.


Then, after the exclusive varieties of traditional Chinese medicines are included in the negotiating scope, it is undoubtedly extremely difficult to increase the sales volume by an order of magnitude. However, the large decline in sales prices is indeed a matter of nailing. Even some analysts believe that the price reduction of some products will reach about 30%. . In addition, due to local negotiations, and the principle of procurement cycle is 1 year, the emergence of different prices in different regions is a high probability event. Under the linkage of various regions, the final price system is gradually encroaching may be foreseeable.


Foreign companies or welcome

Contrary to the exclusive varieties of traditional Chinese medicine, many patented products of foreign-funded enterprises may usher in a positive.


In terms of sales amount, many patented products are ranked very high in terms of drug use, but in fact, from the point of view of usage, since the unit price is very high, the frequency of use of patented drugs is far lower than that of exclusive varieties of traditional Chinese medicine. In the negotiation process, the negotiation rights of patented drugs may be much larger than the exclusive varieties.


On the one hand, the clinical alternatives of patented drugs are very small. As a multinational enterprise, products often have a breakthrough role in the therapeutic field. Competition in the same department is often a patented product of other multinational companies, but in terms of price, transnational The company's ability to maintain prices is higher than domestic companies.


On the other hand, because the profit margin of patented products is extremely horrible, in the negotiation of volume and price, multinational companies have more room to consider the increase brought by price cuts. After all, once there is a large decline, the clinical demand will inevitably increase, especially in major diseases such as cancer, even if the price is reduced by more than 20%, in exchange for the doubling of sales and even several times, it is extremely gratifying for multinational companies. As a result, this makes it easier to reach consensus with government entities.


Finally, the unity of foreign-funded enterprises in China and their impact on high-level national decision-making are much higher than domestic ordinary enterprises. Although it is currently in the context of national anti-monopoly, foreign-funded enterprises still have great bargaining power without giving up the Chinese market.


In fact, the price negotiations involving patent products of multinational pharmaceutical companies have been extensively explored in China in the past two years, especially in the field of major medical insurance. Foreign-funded enterprises have gained a lot in this field. From the enthusiasm of foreign companies participating in major medical insurance, it is also understandable that foreign companies are very happy to find a balance between price reduction and sales surge.


For example, in the special drug price negotiations conducted by Zhejiang in 2014 to promote medical insurance for major illnesses, there were over half foreign-invested enterprises, including Novartis, Eli Lilly, Pfizer, and Bayer; in the medical insurance negotiations in Beijing, Qingdao, and Jiangxi, the patent products of foreign companies even became The most important object of negotiating drugs.


It should be noted that in the case of major illness insurance, the government and foreign companies do not make any commitment to the use of drugs. In addition to the price reduction, medical insurance reimbursement is regarded by foreign companies as a driving force to reduce patient expenditures and thus expand sales. In the national negotiations, with the national unified price and sales guarantee, the sales expansion of patented products may be very worth looking forward to.