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What effect will the surging requirement for lowering the prices of essential drugs apply on the foreign drugs, whose sky-high prices come from their independent pricing rights?
On November 23, there came out the news from the National Development and Reform Commission (NDRC) is working on the measures of lowering essential drugs whose prices are independently fixed. All the foreign drugs in the essential drug list are included.
The executives in Novartis and Bayer said that they had not received the official document from the government department, but they would keep an eye on the possible changes.
According to an insider of the NDRC, the Drug Price Department of the NDRC held a conference on November 22, in which a lot of drug experts in China were present. They studied the issue about lowering the price of the independent pricing drugs. No delegates from the pharmaceutical companies are present so they don’t know anything about it.”
So far as we know, the foreign drugs usually enjoy the independent pricing right, which has exempted them from the previous waves of lowering drug prices. “The adjustment to the prices of independent pricing drugs is a duty of the NDRC,” said the aforementioned insider from the NDRC.
On November 23, the NDRC issued the note to stabilize the price to guarantee the ordinary people’s lives. The note especially mentioned the necessity of “lowering the drug price which is too high”.
An insider said: “This time the foreign drugs will take the lead in lowering the prices, followed by the domestic-made drugs in the second part of 2011.” For this, a director of the R&D-based Pharmaceutical Association Committee (RDPAC) said: “Since the official document has not been issued, we are not going to make responses.”
Privileges of the R&D-based drugs
The super national treatment for the foreign R&D-based drugs should be blamed for the unfair competition in the pharmaceutical industry in China.
In order to encourage the drug companies to get engaged in the drug research and development (R&D). In 2000 the government issued “The Government Way of Fixing Drug Prices”, which included a lot of favorable policies for the R&D-based drugs. This drove the R&D-based drugs away from the pricing system for ordinary drugs.
In truth, apart from some R&D-based drugs whose patent protection is still valid, most of the drugs in China have seen their patent expire and a large number of generic drugs have flowed into the market. But these expired R&D-based drugs are still enjoying the high prices.
The rules about the generic drugs stipulated that the effect of generic drugs should be within a 20% disparity with the R&D drugs. It was once thought to be hard to maintain the effect and safety of the generic drugs. Therefore, the rules kept the high prices of the R&D-based drugs even though they lost their patent protection.
The most representative example is aspirin. Germany-based Bayer took the lead in developing aspirin. 110 years later, Bayer still had the independent pricing right for aspirin in China in 2009. A pack of 30 aspirin enteric-coated tablets, each of weighing 100mg, was sold at 18.8 yuan (USD 2.27). In the essential drug bidding of Qinghai in 2009, the price for Bayer’s aspirin enteric-coated tablets was 15.47 yuan/pack (USD 2.32). In comparison, the domestic-made tablets with the same dosage only cost 1.5 yuan (USD 0.225).
The relevant association once had a survey about the essential drugs developed by foreign companies and having independent pricing rights. All the nine selected foreign R&D-based drugs are much more expensive than the same kinds of domestic drugs, with the 13.11 times higher. The price of the captopril developed by Bristol-Myers Squibb was 22 higher than the national unified price.
According to the stipulation, the users of the foreign drugs having the independent pricing right in the essential drug list can still get a full reimbursement for their drug expenditure from the medical insurance. The expensive foreign drugs take a bite at the medical insurance funds and any other funds used for the improving China’s healthcare level. The fascination of the Chinese for the high-price drugs pricked up the situation. Compared with the ordinary drugs, these high-price drugs enjoy bigger profit space and are easier to be spread to the market.
In truth, the strong ability of making generic drugs in China frightened the foreign drug companies a lot. 92% of the chemical drugs in China are not based on research and development. Beijing Sunshine Nuohe Pharmaceutical Research Co., Ltd is a drug company specializing in producing generic drugs. According to its director, the company begins to get into “making the generic sample” of an R&D drug three or four years earlier than its patent expiry. When the patent protection is not available, the generic drugs will be soon found in the market.
Even in the USA whose drug industry is the most developed in the world, the sales of generic drugs accounts for 45% of the total sales of the drug industry. As the drug giants are gradually losing the patent protection for their R&D-based drugs, the proportion of generic drugs will improve further.
The privilege of “independent pricing” once again distinguished the “outdated” R&D-based drugs from the generic drugs. It is inevitable to lower the drug prices while spreading the essential drug system. The drugs that enjoy the independent pricing right are the biggest hurdle.
Negotiation about decreasing rate on the road
Previously, the China Pharmaceutical Industry Research and Development Association (CPIRDA) issued the report about the super national treatment for the foreign R&D-based drugs having independent pricing right and the fight against inflation in China. This caused the guess that the NDRC’s measures against the independent pricing drugs are due to the pressure.
An insider from the NDRC said: “Decreasing the drug price is what we have been planning for long. A complete category of the drugs that enjoy independent pricing rights will be affected by this measure.”
In July 2010, the NDRC issued the “Drug Price Management (draft for collecting advices)”. This is the first document with the aim of adjusting the drug prices since the year of 2000. In that document the “R&D-based drugs” and “independent pricing” are erased and new rule was put forward – the prices of the drugs with patent should be decreased once every three years – to make the drug companies tense.
Soon after the issuance of the document, the RDPAC collected the advices from 20 foreign drug firms and submitted them to the NDRC with the requirements of keeping the independent pricing right. “The government should keep the decreasing rate of the R&D-based drug price the same with the international level, which can raise the domestic drug companies’ enthusiasm in innovation.”
The NDRC has already expected the response. The R&D-based drugs are the major sources of the foreign drug firms in China, which nearly contribute to the 90% of the sales amount. Some major Chinese domestic companies have already turned their focus to the R&D-based drugs. The independent pricing right is a magnet that attracts the powerful companies.
Now the NDRC followed the document and took measures to lower the price of the drugs having independent pricing right in the essential drug list. This measure gradually reduces the profit space for the drugs having independent pricing right. The NDRC denied the possibility of reducing the drug price to the normal level at one time and it will be done step by step.
According to a rough estimation, about 70 foreign drug firms have 325 kinds of drugs having the independent pricing right in the essential drug list. Once the document is put into the official implementation, GlaxoSmithKline, Lilly, Pfizer, Bayer and AstraZeneca have to endure the risk of lowered drug price. They have to make a choice: whether to reduce the price according to the rule or end the sale of the market.
It is known that Shanghai is working on the plan of driving the drugs whose prices are independently fixed out of the essential drug list. This could bring a fatal blow to the foreign drug firms.
On November 23, there came out the news from the National Development and Reform Commission (NDRC) is working on the measures of lowering essential drugs whose prices are independently fixed. All the foreign drugs in the essential drug list are included.
The executives in Novartis and Bayer said that they had not received the official document from the government department, but they would keep an eye on the possible changes.
According to an insider of the NDRC, the Drug Price Department of the NDRC held a conference on November 22, in which a lot of drug experts in China were present. They studied the issue about lowering the price of the independent pricing drugs. No delegates from the pharmaceutical companies are present so they don’t know anything about it.”
So far as we know, the foreign drugs usually enjoy the independent pricing right, which has exempted them from the previous waves of lowering drug prices. “The adjustment to the prices of independent pricing drugs is a duty of the NDRC,” said the aforementioned insider from the NDRC.
On November 23, the NDRC issued the note to stabilize the price to guarantee the ordinary people’s lives. The note especially mentioned the necessity of “lowering the drug price which is too high”.
An insider said: “This time the foreign drugs will take the lead in lowering the prices, followed by the domestic-made drugs in the second part of 2011.” For this, a director of the R&D-based Pharmaceutical Association Committee (RDPAC) said: “Since the official document has not been issued, we are not going to make responses.”
Privileges of the R&D-based drugs
The super national treatment for the foreign R&D-based drugs should be blamed for the unfair competition in the pharmaceutical industry in China.
In order to encourage the drug companies to get engaged in the drug research and development (R&D). In 2000 the government issued “The Government Way of Fixing Drug Prices”, which included a lot of favorable policies for the R&D-based drugs. This drove the R&D-based drugs away from the pricing system for ordinary drugs.
In truth, apart from some R&D-based drugs whose patent protection is still valid, most of the drugs in China have seen their patent expire and a large number of generic drugs have flowed into the market. But these expired R&D-based drugs are still enjoying the high prices.
The rules about the generic drugs stipulated that the effect of generic drugs should be within a 20% disparity with the R&D drugs. It was once thought to be hard to maintain the effect and safety of the generic drugs. Therefore, the rules kept the high prices of the R&D-based drugs even though they lost their patent protection.
The most representative example is aspirin. Germany-based Bayer took the lead in developing aspirin. 110 years later, Bayer still had the independent pricing right for aspirin in China in 2009. A pack of 30 aspirin enteric-coated tablets, each of weighing 100mg, was sold at 18.8 yuan (USD 2.27). In the essential drug bidding of Qinghai in 2009, the price for Bayer’s aspirin enteric-coated tablets was 15.47 yuan/pack (USD 2.32). In comparison, the domestic-made tablets with the same dosage only cost 1.5 yuan (USD 0.225).
The relevant association once had a survey about the essential drugs developed by foreign companies and having independent pricing rights. All the nine selected foreign R&D-based drugs are much more expensive than the same kinds of domestic drugs, with the 13.11 times higher. The price of the captopril developed by Bristol-Myers Squibb was 22 higher than the national unified price.
According to the stipulation, the users of the foreign drugs having the independent pricing right in the essential drug list can still get a full reimbursement for their drug expenditure from the medical insurance. The expensive foreign drugs take a bite at the medical insurance funds and any other funds used for the improving China’s healthcare level. The fascination of the Chinese for the high-price drugs pricked up the situation. Compared with the ordinary drugs, these high-price drugs enjoy bigger profit space and are easier to be spread to the market.
In truth, the strong ability of making generic drugs in China frightened the foreign drug companies a lot. 92% of the chemical drugs in China are not based on research and development. Beijing Sunshine Nuohe Pharmaceutical Research Co., Ltd is a drug company specializing in producing generic drugs. According to its director, the company begins to get into “making the generic sample” of an R&D drug three or four years earlier than its patent expiry. When the patent protection is not available, the generic drugs will be soon found in the market.
Even in the USA whose drug industry is the most developed in the world, the sales of generic drugs accounts for 45% of the total sales of the drug industry. As the drug giants are gradually losing the patent protection for their R&D-based drugs, the proportion of generic drugs will improve further.
The privilege of “independent pricing” once again distinguished the “outdated” R&D-based drugs from the generic drugs. It is inevitable to lower the drug prices while spreading the essential drug system. The drugs that enjoy the independent pricing right are the biggest hurdle.
Negotiation about decreasing rate on the road
Previously, the China Pharmaceutical Industry Research and Development Association (CPIRDA) issued the report about the super national treatment for the foreign R&D-based drugs having independent pricing right and the fight against inflation in China. This caused the guess that the NDRC’s measures against the independent pricing drugs are due to the pressure.
An insider from the NDRC said: “Decreasing the drug price is what we have been planning for long. A complete category of the drugs that enjoy independent pricing rights will be affected by this measure.”
In July 2010, the NDRC issued the “Drug Price Management (draft for collecting advices)”. This is the first document with the aim of adjusting the drug prices since the year of 2000. In that document the “R&D-based drugs” and “independent pricing” are erased and new rule was put forward – the prices of the drugs with patent should be decreased once every three years – to make the drug companies tense.
Soon after the issuance of the document, the RDPAC collected the advices from 20 foreign drug firms and submitted them to the NDRC with the requirements of keeping the independent pricing right. “The government should keep the decreasing rate of the R&D-based drug price the same with the international level, which can raise the domestic drug companies’ enthusiasm in innovation.”
The NDRC has already expected the response. The R&D-based drugs are the major sources of the foreign drug firms in China, which nearly contribute to the 90% of the sales amount. Some major Chinese domestic companies have already turned their focus to the R&D-based drugs. The independent pricing right is a magnet that attracts the powerful companies.
Now the NDRC followed the document and took measures to lower the price of the drugs having independent pricing right in the essential drug list. This measure gradually reduces the profit space for the drugs having independent pricing right. The NDRC denied the possibility of reducing the drug price to the normal level at one time and it will be done step by step.
According to a rough estimation, about 70 foreign drug firms have 325 kinds of drugs having the independent pricing right in the essential drug list. Once the document is put into the official implementation, GlaxoSmithKline, Lilly, Pfizer, Bayer and AstraZeneca have to endure the risk of lowered drug price. They have to make a choice: whether to reduce the price according to the rule or end the sale of the market.
It is known that Shanghai is working on the plan of driving the drugs whose prices are independently fixed out of the essential drug list. This could bring a fatal blow to the foreign drug firms.