It has been over two years since China piloted centralized drug procurement in 11 cities. The pilot procurement program affected the drug products on both sides – those won the bid and their rivals outside the program.
"4+7" Pilot Volume-based Procurement
In Nov. 2018, 11 Chinese cities started to pilot centralized drug procurement with designated volumes. The trailblazers were four municipalities, Beijing, Tianjin, Shanghai and Chongqing, and seven cities, Shenyang, Dalian, Xiamen, Guangzhou, Shenzhen, Chengdu and Xi'an. That's why the procurement is called "4+7" Cities Centralized Drug Procurement.
The 11 cities launched a joint procurement office to carry out centralized drug procurement on behalf of the public healthcare institutions in the pilot regions. After the office published the procurement plan and requirements1, 79 pharmaceutical companies bid to supply products. Finally, 25 drug products defeated the other competitors in price negotiations and earned their places in the program2.
The 25 products' therapeutic domains are shown in the figure below.
Overall Market Data: Sales Volume Grows with Lowered Unit Price3
The total sales volume of the drugs on the "4+7" procurement list registered massive growth with an average price cut of 52%. However, the drugs' overall sales revenue shrank. Patent drugs' total sales revenue and volume declined; generic drugs' total sales revenue decreased but sales volume increased.
The reason was that people prefer to buy generic drugs with good quality and lower prices. The generic drugs' quality has been improved since they have to prove in the consistency evaluation that they are as good as the original ones in quality and efficacy. On the other hand, generic drugs experienced steep price cuts during the negotiation for entering the procurement program.
As a result, more generic drugs were sold with thin profit margins. That's why their sales revenue dwindle despite the surge in sales volume. In general, the Chinese market prefers generic drugs with lower prices whose quality is on par with expensive original ones.
Market Data of Drugs in the “4+7” Procurement Program in China | ||||
2018 | 2020 | Compound Annual Growth Rate (CAGR)/% | ||
Total Drugs | Sales Revenue/billion yuan | 65.411 | 38.927 | -40.49 |
Sales Volume/billion units | 11 | 12.98 | 18.02 | |
Patent Drugs | Sales Revenue/billion yuan | 33.662 | 19.725 | -41.4 |
Sales Volume/billion units | 3.551 | 2.976 | -16.19 | |
Generic Drugs | Sales Revenue/billion yuan | 31.749 | 19.201 | -39.52 |
Sales Volume/billion units | 7.445 | 10.002 | 34.35 |
In Chinese hospitals, the overall sales revenue of the 25 products in the "4+7" procurement fell off while the overall sales volume climbed up. Patent drugs' total sales revenue and volume dropped off; generic drugs' total sales revenue declined with sales volume rising. The trends are the same with the overall data mentioned above. There was a tendency that generic drugs were replacing patent drugs by taking a larger proportion in prescribed medicines, as the imitators enjoy good quality with low prices.
Market Data of Drugs Sold at Hospitals in the "4+7" Procurement Program in China | ||||
2018 | 2020 | CAGR/% | ||
Total Drugs | Sales revenue/billion yuan | 54.744 | 29.25 | -46.57 |
Sales volume/billion doses | 8.305 | 9.948 | 19.78 | |
Patent Drugs | Sales revenue/billion yuan | 29.76 | 14.047 | -52.80 |
Sales volume/billion doses | 2.830 | 1.948 | -31.17 | |
Generic Drugs | Sales revenue/billion yuan | 26.784 | 15.203 | -43.24 |
Sales volume/billion doses | 5.475 | 8.001 | 46.12 | |
Proportion in prescriptions | 65.82% | 80.42% | / |
In China's retail drugstores, the 25 products experienced decreases in total sales revenue and growth in total sales volume. Patent drugs' total sales revenue shrank a bit though their total sales volume expanded. Generic drugs' total sales revenue declined despite the growth of their total sales, the same trend as the sales in the hospitals. According to the data, patent drugs still had their edge on generics in sales volume given that both of them have cut prices at different rates.
Market Data of Drugs Sold at Retailers in the "4+7" Procurement Program in China | ||||
2018 | 2020 | CAGR/% | ||
Total Drugs | Sales revenue/billion yuan | 10.637 | 9.655 | -9.23 |
Sales volume/billion doses | 2.679 | 3.022 | 12.8 | |
Patent Drugs | Sales revenue/billion yuan | 5.702 | 5.678 | -0.42 |
Sales volume/billion doses | 0.721 | 1.028 | 42.58 | |
Generic Drugs | Sales revenue/billion yuan | 4.935 | 3.977 | -19.42 |
Sales volume/billion doses | 1.958 | 1.994 | 1.84 |
Market Data of Each Drug on the "4+7" Procurement List
Note: The drug listed in the two tables below include
(1) the specific products procured by the program; and
(2) those not procured by program but sharing the same active pharmaceutical ingredients and drug common names with the procured ones.
Sales Revenue of Each Drug on the "4+7" Procurement List in China | ||||||
Drug Common Name | Sales Revenue/billion yuan | Growth Rate/% | ||||
2018 | 2019 | 2020 | 2019 | 2020 | CAGR | |
Amlodipine Besilate Tablets | 4.076 | 4.051 | 2.662 | -0.61 | -34.28 | -78.23 |
Atorvastatin Calcium Tablets | 11.657 | 11.509 | 6.189 | -1.27 | -46.22 | -82.30 |
Cefuroxime Axetil Tablets | 0.287 | 0.377 | 0.28 | 31.26 | -25.65 | -67.47 |
Citalopram Hydrobromide Capsules | 0.218 | 0.238 | 0.26 | 9.18 | 9.61 | -60.11 |
Clopidogrel Bisulfate Tablets | 10.19 | 9.429 | 4.112 | -7.47 | -56.39 | -86.55 |
Dexmedetomidine Hydrochloride Injection | 2.351 | 2.919 | 3.411 | 24.12 | 16.89 | -51.64 |
Enalapril Maleate | 0.365 | 0.344 | 0.264 | -5.86 | -23.25 | -75.92 |
Entecavir Dispersible Tablets | 7.080 | 5.805 | 2.469 | -18.01 | -57.47 | -88.38 |
Flurbiprofen Axetil Injection | 2.224 | 1.893 | 0.73 | -14.90 | -61.43 | -89.06 |
Fosinopril Sodium Tablets | 0.196 | 0.144 | 0.075 | -26.40 | -47.93 | -87.23 |
Gefitinib Tablets | 1.818 | 1.58 | 1.201 | -13.11 | -23.97 | -77.98 |
Irbesartan Hydrochlorothiazide Tablets | 1.473 | 1.46 | 0.895 | -0.94 | -38.65 | -79.74 |
Imatinib Mesylate | 2.027 | 1.947 | 1.747 | -3.95 | -10.27 | -71.27 |
Irbesartan | 2.189 | 2.101 | 1.285 | -4.04 | -38.84 | -80.44 |
Levetiracetam Tablets | 0.852 | 0.948 | 0.96 | 11.26 | 1.23 | -62.46 |
Lisinopril | 0.02 | 0.015 | 0.01 | -23.53 | -38.46 | -84.31 |
Losartan Potassium | 1.282 | 1.111 | 0.761 | -13.34 | -31.50 | -80.21 |
Montelukast Sodium | 2.236 | 2.43 | 1.391 | 8.68 | -42.75 | -79.26 |
Montmorillonite Powder | 0.04 | 0.061 | 0.04 | 53.57 | -34.88 | -66.67 |
Olanzapine Tablets | 2.87 | 2.845 | 1.892 | -0.87 | -33.39 | -78.02 |
Paroxetine Hydrochloride Tablets | 0.765 | 0.712 | 0.45 | -7.03 | -36.70 | -80.38 |
Pemetrexed Disodium for Injection | 3.804 | 3.875 | 3.673 | 1.87 | -5.22 | -67.82 |
Risperidone Tablets | 0.932 | 0.845 | 0.611 | -9.32 | -27.72 | -78.15 |
Rosuvastatin Calcium Tablets | 5.126 | 5.12 | 2.813 | -0.12 | -45.07 | -81.71 |
Tenofovir Disoproxil Fumarate Tablets | 1.331 | 63.253 | 0.744 | 12.33 | -50.22 | -81.36 |
Total | 65.411 | 63.253 | 38.927 | -3.30 | -38.46 | -80.16 |
Sales Volume of Each Drug on the "4+7" Procurement List in China | ||||||
Drug Common Name | Sales Volume/billion doses | Growth Rate/% | ||||
2018 | 2019 | 2020 | 2019 | 2020 | CAGR | |
Amlodipine Besilate Tablets | 1.698 | 1.719 | 1.391 | 1.24 | -19.08 | -72.69 |
Atorvastatin Calcium Tablets | 1.965 | 2.327 | 3.102 | 18.42 | 33.30 | -47.38 |
Cefuroxime Axetil Tablets | 0.12 | 0.152 | 0.101 | 26.67 | -33.55 | -71.94 |
Citalopram Hydrobromide Capsules | 0.04 | 0.043 | 0.046 | 7.50 | 6.98 | -61.67 |
Clopidogrel Bisulfate Tablets | 1.599 | 1.676 | 1.452 | 4.82 | -13.37 | -69.73 |
Dexmedetomidine Hydrochloride Injection | 0.018 | 0.024 | 0.024 | 33.33 | 0.00 | -55.56 |
Enalapril Maleate | 0.461 | 0.452 | 0.448 | -1.95 | -0.88 | -67.61 |
Entecavir Dispersible Tablets | 0.531 | 0.652 | 0.765 | 22.79 | 17.33 | -51.98 |
Flurbiprofen Axetil Injection | 0.035 | 0.038 | 0.028 | 8.57 | -26.32 | -73.33 |
Fosinopril Sodium Tablets | 0.075 | 0.072 | 0.064 | -4.00 | -11.11 | -71.56 |
Gefitinib Tablets | 0.027 | 0.03 | 0.037 | 11.11 | 23.33 | -54.32 |
Irbesartan Hydrochlorothiazide Tablets | 0.47 | 0.503 | 0.578 | 7.02 | 14.91 | -59.01 |
Imatinib Mesylate | 0.042 | 0.053 | 0.062 | 26.19 | 16.98 | -50.79 |
Irbesartan | 0.95 | 1.086 | 1.119 | 14.32 | 3.04 | -60.74 |
Levetiracetam Tablets | 0.127 | 0.16 | 0.189 | 25.98 | 18.13 | -50.39 |
Lisinopril | 0.018 | 1.5 | 0.014 | -16.67 | -6.67 | -74.07 |
Losartan Potassium | 0.267 | 0.283 | 0.295 | 5.99 | 4.24 | -63.17 |
Montelukast Sodium | 0.353 | 0.409 | 0.272 | 15.86 | -33.50 | -74.32 |
Montmorillonite Powder | 0.057 | 0.081 | 0.101 | 42.11 | 24.69 | -40.94 |
Olanzapine Tablets | 0.272 | 0.303 | 0.354 | 11.40 | 16.83 | -56.62 |
Paroxetine Hydrochloride Tablets | 0.172 | 0.187 | 0.189 | 8.72 | 1.07 | -63.37 |
Pemetrexed Disodium for Injection | 0.002 | 0.003 | 0.003 | 50.00 | 0.00 | -50.00 |
Risperidone Tablets | 0.543 | 0.547 | 0.564 | 0.74 | 3.11 | -65.38 |
Rosuvastatin Calcium Tablets | 1.069 | 1.311 | 1.579 | 22.64 | 20.44 | -50.76 |
Tenofovir Disoproxil Fumarate Tablets | 0.085 | 0.14 | 0.201 | 64.71 | 43.57 | -21.18 |
Total | 10.996 | 12.266 | 12.978 | 11.55 | 5.80 | -60.66 |
Market Data of Each Patent Drug on the "4+7" Procurement List
Note: These drug products listed in the two tables below are original drug products which were
(1) procured by the program; or
(2) not procured by the program but share the same active pharmaceutical ingredients with the specific products that won in the procurement bidding.
Sales Revenue of Each Patent Drug on the "4+7" Procurement List in China | ||||||
Drug Brand Name | Sales Revenue | Growth Rate/% | ||||
2018 | 2019 | 2020 | 2019 | 2020 | CAGR | |
ALIMTA | 0.392 | 0.382 | 0.687 | -2.67 | 79.91 | -41.63 |
APROVEL | 1.276 | 1.227 | 0.7 | -3.82 | -43.01 | -81.73 |
BARACLUD | 1.938 | 1.517 | 1.131 | -21.72 | -25.48 | -80.56 |
CIPRAMIL | 0.136 | 0.156 | 0.17 | 14.71 | 9.16 | -58.26 |
COAPROVE | 0.718 | 0.719 | 0.343 | 0.13 | -52.29 | -84.07 |
COZAAR | 0.792 | 0.646 | 0.387 | -18.45 | -40.13 | -83.72 |
CRESTOR | 2.713 | 2.635 | 1.796 | -2.85 | -31.85 | -77.93 |
CLIVEC | 1.46 | 1.385 | 1.143 | -5.17 | -17.48 | -73.92 |
IRESSA | 1.309 | 1.138 | 0.804 | -13.06 | -29.38 | -79.53 |
KAI FEN | 2.669 | 2.214 | 1.204 | -17.04 | -45.63 | -84.97 |
KEPPRA | 0.812 | 0.803 | 0.6 | -1.08 | -25.31 | -75.37 |
LIPITOR | 6.914 | 6.895 | 4.143 | -0.27 | -39.92 | -80.03 |
NORVASC | 2.687 | 2.611 | 1.723 | -2.83 | -34.01 | -78.62 |
PLAVIX | 5.938 | 5.509 | 2.061 | -7.23 | -62.59 | -88.43 |
REDILANZ | 0.333 | 0.459 | 0.439 | 37.79 | -4.41 | -56.10 |
RENITEC | 0.003 | 0.001 | 0.00 | -50.00 | -100.00 | -100.00 |
RISPERDAL | 0.365 | 0.322 | 0.259 | -11.63 | -19.73 | -76.36 |
SEROXAT | 0.222 | 0.209 | 0.128 | -6.10 | -38.88 | -80.87 |
SINGULAIR | 1.447 | 1.501 | 0.813 | 3.74 | -45.84 | -81.27 |
VIREAD | 0.931 | 0.905 | 0.531 | -2.86 | -41.27 | -80.99 |
ZEPOLAS | 0.166 | 0.264 | 0.408 | 59.48 | 54.23 | -18.01 |
ZESTRIL | 0.00 | 0.00 | 0.00 | / | / | / |
ZYPREXA | 0.439 | 0.38 | 0.258 | -13.55 | -31.97 | -80.40 |
Total | 33.662 | 31.88 | 19.725 | -5.29 | -38.12 | -80.47 |
Sales Volume of Each Patent Drug on the "4+7" Procurement List in China | ||||||
Drug Brand Name | Sales Volume | Growth Rate/% | ||||
2018 | 2019 | 2020 | 2019 | 2020 | CAGR | |
ALIMTA | 0 | 0 | 0 | / | / | / |
APROVEL | 0.298 | 0.301 | 0.19 | 1.01 | -36.88 | -78.75 |
BARACLUD | 0.071 | 0.061 | 0.049 | -14.08 | -19.67 | -77.00 |
CIPRAMIL | 0.015 | 0.018 | 0.018 | 20.00 | 0.00 | -60.00 |
COAPROVE | 0.161 | 0.171 | 0.186 | 6.21 | 8.77 | -61.49 |
COZAAR | 0.123 | 0.103 | 0.062 | -16.26 | -39.81 | -83.20 |
CRESTOR | 0.375 | 0.395 | 0.313 | 5.33 | -20.76 | -72.18 |
CLIVEC | 0.008 | 0.01 | 0.009 | 25.00 | -10.00 | -62.50 |
IRESSA | 0.006 | 0.008 | 0.001 | 33.33 | 25.00 | -44.44 |
KAI FEN | 0.08 | 0.093 | 0.079 | 16.25 | -15.05 | -67.08 |
KEPPRA | 0.118 | 0.118 | 0.008 | 0.00 | -32.20 | -77.40 |
LIPITOR | 0.84 | 0.892 | 0.617 | 6.19 | -30.83 | -75.52 |
NORVASC | 0.603 | 0.614 | 0.447 | 1.82 | -27.20 | -75.29 |
PLAVIX | 0.372 | 0.371 | 0.516 | -0.27 | 39.08 | -53.76 |
REDILANZ | 0.035 | 0.052 | 0.078 | 48.57 | 50.00 | -25.71 |
RENITEC | 0.002 | 0.001 | 0 | -50.00 | -100.00 | -100.00 |
RISPERDAL | 0.11 | 0.101 | 0.074 | -8.18 | -26.73 | -77.58 |
SEROXAT | 0.026 | 0.025 | 0.022 | -3.85 | -12.00 | -71.79 |
SINGULAIR | 0.215 | 0.232 | 0.133 | 7.91 | -42.67 | -79.38 |
VIREAD | 0.056 | 0.059 | 0.043 | 5.36 | -27.12 | -74.40 |
ZEPOLAS | 0.017 | 0.027 | 0.038 | 58.82 | 40.74 | -25.49 |
ZESTRIL | 0 | 0 | 0 | / | / | / |
ZYPREXA | 0.02 | 0.018 | 0.012 | -10.00 | -33.33 | -80.00 |
Total | 3.6 | 3.7 | 3.0 | 3.35 | -18.91 | -72.06 |
From the data, we can see that the "4+7" procurement program opens a gate to a larger market for some drug products. But larger sales volume does not necessarily mean higher sales revenue. Before treading into the procurement program, companies need to ponder whether the potential huge market can make up the slashed profits resulted from price negotiations.