Data Analysis: What "4+7" Procurement Has Brought to China Drug Market

by Grace Wang May 31, 2021

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.

Grace Wang
ChemLinked Regulatory Analyst & Editor
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