[ET Net News Agency, 13 September 2018] China's National Medical Insurance Bureau
announced plans to test "volume-based drug procurement" in 11 big cities for 33 drugs with
generics that have passed the generic consistency appraisal (GCA).
UBS Global Research thinks generic players will be motivated to cut prices to
retain/gain volume share. As very few drugs are involved at this time, the research house
thinks the near-term impact on the overall industry is unclear, but the downward trend of
generic prices is inevitable as a way to save costs to enhance insurance coverage for
innovative drugs.
In the long term, UBS thinks the policy will have a profound impact on the market share
landscape, and originators' brand generics with high prices and generics with a high
volume share could be negatively affected.
Meanwhile, the shift to procurement-price-based insurance payments will likely also
facilitate the replacement of high-priced drugs. However, it thinks the impact on industry
profit could be milder than the price decline due to savings on drug marketing expenses
(which typically equals 30-40% of a drug's revenue).
UBS thinks Huahai (Shanghai code: 600521) could benefit, as four of its generics are the
only ones to have passed GCA so far. Salubris (Shenzhen code: 002294) could benefit in the
near term, as its generic is the only one that has passed GCA for Clopidogrel. Sino
Biopharmaceutical (01177) could be negatively impacted, as its biggest drug, entecavir
(~20% of revenue), has a ~60% volume share but is priced higher than other generics.
3SBio Inc. (01530) could be more defensive, as biomedicines are not impacted by GCA. The
policy could also help CSPC Pharmaceutical's (01093) albumin paclitaxel enter the market.
(KL)