Business

Pharmaceutical lobby calls for new pricing mechanism

By Liu Jie (China Daily)
Updated: 2010-10-26 08:00

BEIJING - China should establish a drug-pricing mechanism which is quality-oriented, and will stimulate research and development (R&D), said a pharmaceutical lobby on Monday.

The R&D-based Pharmaceutical Association Committee (RDPAC) under the China Association of Enterprises with Foreign Investment said that the mechanism must accord with international principles and promote the sustainable development of the domestic industry.

It hopes a differential pricing mechanism, combined with the publication of a new quality control and product approval system will transform the industry. The new system will start to take effect by the end of this year to replace the old one that took effect in 1998.

"The new pricing mechanism has been proposed to set higher prices for drugs developed domestically and to differentiate between prices for generic medicines produced by different companies at different levels of quality," said James Liu, managing director of RDPAC.

The call for changes to the pricing system is a result of RDPAC's research on quality control systems in the domestic industry.

The research was jointly conducted with Ernst & Young Consulting China and covered 13 large pharmaceutical companies. They included eight international players, such as AstraZeneca, Eli Lilly and Novartis, in addition to the larger Chinese companies, including Zhejiang-based Hisun Pharmaceutical Company, Kunming Pharmaceutical Corporation, and Beijing Second Pharmaceutical Company.

Che Yan, executive director of Ernst & Young Consulting China, said the companies believe a new pricing system will encourage the manufacturing of high-quality, domestically developed products, maintain profit levels and facilitate higher investment in R&D.

"This will reduce problems with quality, and lead to the elimination of some smaller drugmakers who lack quality awareness and professional ability," Che said.

China has more than 5,000 pharmaceutical companies, around 98 percent of which are engaged in generic drug production, accounting for 70 percent of the country's pharmaceutical market, according to statistics from IMS Health, the world's largest healthcare research firm.

"A reduction in the number of companies and an increase in the overall capability of the most powerful players should be on the agenda," said Chen Jiamin, a pharmaceutical industry analyst at Guotai Jun'an Securities Ltd.

The government is expected to issue a biopharmaceutical development plan at the end of this year and it will spend tens of billions of yuan to support biomedicinal development during the 12th Five-Year Plan (2011-2015).

China Daily