[ET Net News Agency, 13 September 2018] An internal drug procurement list was
circulated to the market on 12 September, regarding the 11-city joint GPO (group
purchasing organisation).
The negotiations are still in the early stages and are expected to be finalised near
end-October. UOB Kay Hian has conducted its analysis based on the circulated GPO drug
procurement list. It recommended looking at names less affected by the list and bottom
fish.
The research house noted that the last GPO's average price cut of 44% in Shanghai can
serve as a good reference point.
It believes the new policy is negative for foreign firms. The ultra-high prices of
foreign drug firms make them hardly competitive versus local generics players. With
reference to the previous comparable Shanghai GPO, only one foreign pharmaceutical firm
survived due to its high asking prices.
This time, UOBKH believes the situation is getting much worse as domestic generics firms
have become more qualified than before alongside the large number of BE qualifications (in
the prior Shanghai GPO, only Rosuvastatin has a domestic BE qualifier).
Meanwhile, it said the policy is mixed implications for domestic firms. As the winner of
the tender is guaranteed 70% of the related market share, small market-share holders can
now break the barrier of hospital coverage, and potentially benefit from the GPO by
rapidly ramping up sales even at the cost of lower selling prices.
For companies with a large market share (40% and above), a further increase in sales
volume is unlikely to be enough to offset the big drop in selling prices, UOBKH added.
(KL)