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China’s ‘landmark’ drug pricing guidelines widen biotech profit window: analysts

State Council calls for ‘value-based pricing’ for innovative drugs, a move researchers said would benefit private healthcare players

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Chinese biotech firms reached 157 agreements to out-licence early-stage drugs last year. Photo: Shutterstock
Julie Zhang
The State Council, China’s cabinet, has published guidelines on innovative drug pricing that a bank analyst has described as the “most significant” in a decade, as they aim to reward drug innovation and ease pricing tension for domestic and multinational pharmaceutical companies.
The framework document published this month said patented innovative drugs would be supported through value-based pricing, while the prices of generic drugs would be driven down through market competition and volume-based procurement.

Under volume-based procurement, the government buys drugs in bulk for public hospitals, putting multinational companies under intense price and competitive pressure.

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The policy allows biotech companies to charge higher prices in the private market, including at private hospitals and retail pharmacies, and online.

The document also called for commercial insurance to play a bigger role in funding innovative drugs.
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“This provides more profitable channels to innovative drug makers and potentially benefits internet healthcare players, pharmacies and private healthcare services, such as Alibaba Health, Yifeng and Hygeia,” John Yung, head of Asia healthcare research at Citigroup, wrote in a research report released on April 16.

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