Wuhan Purchasing With Quantity: Distribution Of Market Share According To The Price Range, And The Participation Of Foreign Enterprises Is Beyond Expectation.

A Wuhan pilot insulin product purchase price negotiation rules adopted a price reduction system document, triggering a heated debate in the industry.

The document shows that the Wuhan purchasing quantity is grouped according to the types of drugs, and then different market share is given according to the different price reductions of the same group of enterprises. The reduction and not the lowest price are used to determine the agreed purchase quantity and substitution dosage of the enterprise, which makes the participation of the foreign company with a higher price. However, the domestic pharmaceutical enterprises, which originally relied on price advantage to gain market, are at a disadvantage in competition.

Shi Lichen, founder of Ding Chen medical consultation, analyzed the way and need of Wuhan's quantity purchase. "This is obviously a domestic enterprise that helps foreign companies to expel the Wuhan market. If the 5%-10% is reduced to 70%, then the willingness of foreign enterprises will naturally increase, because this is the largest share of the market with a minimal reduction. In absolute terms, the absolute value of domestic enterprises will never exceed that of foreign enterprises, which will lead to the reduction of the space of Chinese generic drugs in the Chinese market. "

Detailed rules

In January 9th, foreign enterprises, such as novo Nord, Senofi, Lilly trade, Jiangsu Lilly and domestic enterprises Tonghua Dong Bao, Hefei Tian Mai, Sansheng pharmaceutical company, Zhuhai Federation and so on, were divided into 7 groups according to the onset time of insulin to negotiate price negotiations.

The grouping method is mainly divided into seven groups according to the two generation (recombinant human insulin) and the three generation insulin (analogue) and function. In addition to the group of only 1 suppliers, there are 3 or more manufacturers in each group.

This insulin band size negotiation rule is better than market expectation. According to the relevant rules, if the reduction in quantity purchases is less than 5%, the share of the corresponding products in 2018 will be more than 50%, which will be allocated to the enterprises with a large drop in the same group. If the decrease is between 5%-10%, it will get 70% of its original market share; if the drop is larger than 10%, it can get its original market share by 90%; the rest of each product in the same group will be replaced by the total substitution. The total amount is allocated by 50%, 30% and 20% share, and the top 3 (the absolute amount) can be obtained.

From the previous announcement on the grouping and purchase volume of insulin products, the combined purchase volume of 7 combinations was 1 million 705 thousand and 690, and the market size was about 130 million yuan.

Premixed analogue, premixed human insulin, long-acting and super long-acting analogues occupy the major share in the volume of procurement, reaching 96% of the total purchase volume, while the largest amount is long-acting, super long-acting analogues, followed by premix analogues, and the total amount of the two groups accounts for 69% of the total.

Jiang Qi, an analyst at Sino Thai securities, pointed out that the negotiation rules for the quantity of insulin were much milder than that of the chemical products. Therefore, most of the prices of insulin products are expected to be lower than market expectations. "First, the original suppliers can continue to win the bid, not each group has the exclusive bid; second, there is no rigid price reduction request, the price decline is the same as the lowest price in the product nationwide, the guidance price reduction is moderate."

However, the mild rules have not been well received by the industry, but aroused many doubts. "China's drug price negotiations decline only 5%-10% can not meet demand." Shi Lichen said: "in view of at least 3 generics produced above, China's drug procurement negotiations with quantity, regardless of any region, if the price reduction of less than 20%, is a painting of peace."

It is worth noting that in 2018, the overall domestic insulin market was slightly more than 20 billion yuan, while the market size of insulin reported in Wuhan area was about 130 million yuan, accounting for only less than 0.7% of the total market share. Jiang Qi also said: "for mature enterprises, the Wuhan market has little impact on its overall revenue, and the price dynamics are expected to be limited. Some enterprises are likely to make no price cuts to safeguard their national price system."

Is domestic business limited?

According to the current median price in Hubei, the price of foreign products is higher than the domestic product price by more than 20% compared to the same drugs, and the share of foreign enterprises accounted for more than 50% in the market share.

Insiders pointed out: "according to the rules of the program, if the domestic and foreign enterprises compete with the same decline, the market volume of foreign capital enterprises will be much larger than that of domestic funded enterprises. The rules do not form an alternative competition pattern, and can not guarantee the market trend of low-cost state-owned enterprises to replace high priced foreign products. "

In fact, it is the focus of the current market that whether import can be realized by carrying quantity purchases.

In Shi Lichen's view, China has been suffering from over thirty or forty years' monopoly of high priced generic drugs and proprietary drugs by foreign pharmaceutical companies. "Chinese pharmaceutical companies are willing to substantially reduce their prices and gain full market share in the country, rather than in some parts of the country. Under this premise, China's pharmaceutical enterprises will develop a large number of low-cost generic drugs, and not be monopolized by foreign-funded enterprises. Only when China's own pharmaceutical companies become stronger can prices really come down, because they serve China's market first. "

Shi Lichen believes that the most important task for the current regulatory authorities of China's pharmaceutical industry to introduce any policy is to support Chinese pharmaceutical enterprises. The second priority is to restrict the pricing power of foreign-funded enterprises through the cheap imitation drugs of Chinese pharmaceutical enterprises. This is the only way for any country to reduce drug prices.

Any drug negotiation with quantity purchase is based on the final decision of the price, not on the price of the relative price or the declines and absolute values. If we really represent the National Bureau to make a pilot project, the first negotiation rule must be the lowest price for the highest market share in the national market, so it is very difficult for Wuhan to promote the whole country. Shi Lichen continued to add.

It is worth noting that the buyer signed a confidentiality agreement with the buyer, so the price will not be publicized. Shi Lichen pointed out that the winning price will not be kept secret. Although the negotiations promise not to hang up the net, the so-called secrecy may be just a bad check. In particular, the hospital price is the implementation of zero price difference, Ping Ping out, the specific number is easy to see through.

However, a representative of the central government's government affairs disagreed. He told the twenty-first Century economic report: "this is about the integrity of the government. The profit of some areas will not be collected by other markets. It is a promise of confidentiality agreements. Today, the market price is flying everywhere, and the final implementation is based on the provincial platform.