The Chinese Communist Party has implemented the drug centralized procurement policy for several years, which has been highly controversial in the industry. Regarding the chaos in centralized procurement, a senior executive of a well-established generic drug company in Zhejiang province expressed that currently, the selected prices of some centralized procurement products are lower than the production costs. If this situation continues, it will undoubtedly lead to serious issues.
Another executive of a generic drug CRO company bluntly stated that the current centralized procurement policy is like “killing three warriors with two peaches”, completely disregarding the cost pressure on enterprises and the long-term development of the industry.
The Chinese Communist authorities officially launched the drug centralized procurement and utilization pilot before the outbreak of COVID-19 (CCP virus) in 2019. The so-called “drug centralized procurement” refers to the procurement method in which multiple medical institutions purchase the required drugs through centralized bidding organized by drug procurement organizations. The tenth batch of centralized drug procurement organized by the authorities in December last year officially accepted corporate application materials.
According to a report by “Chinese Business News” on February 6, a senior executive of a well-established generic drug company in Zhejiang province stated that while generic drug consistency evaluation is undoubtedly beneficial to the country and the people, in the current environment of extremely low-priced centralized procurement policy, enterprises bear the cost of conducting consistency evaluation and quality input on their own, which greatly reduces their enthusiasm to participate in consistency evaluation.
The senior executive also emphasized that currently, the selected prices of some centralized procurement products are surprisingly lower than the production costs, which will surely lead to serious issues in the long run.
The so-called “generic drug consistency evaluation” refers to the staged and phased evaluation of the quality consistency of generic drugs that have been approved for marketing, based on the principle of consistency with the quality and efficacy of the original drug, ensuring that generic drugs reach the same level of quality and efficacy as the original drugs.
A head of a CRO (Contract Research Organization) focusing on generic drugs revealed that the bidding prices for centralized procurement drugs are so low that enterprises cannot make any profit. For example, for aspirin enteric-coated tablets and metoclopramide injection, which were selected at low prices in the 2024 centralized procurement, according to their estimate, supplying at the lowest selected price results in a loss for every supply transaction.
The China Medical Insurance Bureau announced the results of the tenth batch of centralized drug procurement in December 2024. Among them, the selected price for aspirin enteric-coated tablets is as low as 3.4 cents/piece, and the lowest selected price for metoclopramide injection is as low as 0.22 yuan/piece.
An executive of a company that participated in the centralized procurement of metoclopramide injection but was not selected, indicated that their company manufactures the raw materials independently, yet the variable cost of producing one metoclopramide injection reaches 0.6 yuan, with the total cost including taxes around 1 yuan. When adding equipment depreciation, R&D expenses, and other costs, such a price makes it impossible to participate in the selection.
The executive is also deeply puzzled why some companies are willing to bid at prices below cost, especially when persisting in participating despite facing losses, which is truly perplexing.
The aforementioned executive of the generic drug CRO company stated that the current centralized procurement policy is like “killing three warriors with two peaches”, completely overlooking the cost pressure on enterprises and the long-term development of the industry.