It has long been a policy objective of the Chinese Government to reduce drug prices in China while ensuring drug quality. The National Development and Reform Commission of China (NDRC) recently took a series of measures to implement this objective.
The NDRC recently published an article on its website, setting forth its plan to regulate drug prices, and highlights are:
Enhancing monitoring of the manufacturing cost and ex factory price of drugs;
Exploring new methods for determining drug prices, such as a combination of drug economic assessment and international price comparison, universal pricing, etc.;
Continuing to reduce prices of high-priced drugs, particularly prices of innovative drugs made by multinational companies;
Enhancing regulation of pricing activities in the drug distribution chain, and encouraging consolidation of drug distributors;
Establishing a dynamic adjustment mechanism for drug prices, and adjusting drug prices in accordance with changes in drug manufacturing costs and market prices; and
Implementing policies to incentivize drug R&D and innovation, and providing preferential treatment to generic drugs that have met international standards.
NDRC also stated that for generic drugs with multiple manufacturers, the agency will set the Maximum Retail Price by referring to the manufacturing cost and market price of the manufacturer that has the highest quality standards.
As one measure to implement the above plan, the NDRC published a notice on March 26, requiring drug manufacturers to report ex-factory prices of drugs subject to government-set Maximum Retail Prices (the “Regulated Drugs”). Key requirements are:
From September 1, 2012, manufacturers need to report the ex factory price (tax included) of the smallest retail package of the Regulated Drugs.
Drug manufacturers have the obligation to report the drug prices. For imported drugs, drugs prices may be reported by the domestic agents authorized by the foreign manufacturers.
From 2013, drug manufacturers need to report the lowest, highest and average ex factory price of the Regulated Drugs, annual sales income and quantity, etc. of the Regulated Drugs.
Provincial pricing authorities need to monitor the reported ex factory price of the Regulated Drugs. If there is a huge difference between the reported ex factory price and the retail price at hospitals, the pricing authorities will notify this difference to local drug procurement authorities and recommend disqualification of the drug manufacturer in local drug bidding programs.
The NDRC also announced that it decided to lower the Maximum Retail Price of certain digestive drugs. The price reduction will affect more than 300 digestive drugs of 53 types. The average price reduction is 17% for all drugs, and 22% for high-priced drugs. The NDRC estimated that the total value of price reduction per year will be over 3 billion RMB.
Sidley has a powerful, fully integrated life sciences practice serving multi-national pharmaceutical, biotechnology, medical device and food companies in every aspect of their business operations in China. Sidley’s Foreign Direct Investment, general Commercial, Corporate, M&A/Joint Venture, Antitrust, FCPA, Licensing, IP, provincial government work, as well our Regulatory practice permits us to serve virtually every legal need of our life sciences clients in China.
Sidley is the first international law firm to establish a stand-alone, comprehensive food and drug regulatory practice in China. As an integral part of our Global Life Sciences practice, we bring our knowledge of industry practices in the U.S. and EU to each project in China and help develop global Standard Operation Procedures (SOPs) and benchmark best practices.
On three continents, Sidley’s Global Life Sciences Practice team offers coordinated cross-border and national advice on Food, Drug and Medical Device Regulatory, Life Sciences Enforcement, Litigation and Compliance, Healthcare Regulatory, Products Liability, Intellectual Property, Corporate and Technology Transactions, Securities and Corporate Finance, International Trade and Arbitration, FCPA/Anti-Corruption, Antitrust/Competition, Environmental/Nanotechnology.
Globally rated as one of the top life sciences practices, our team includes former senior government officials, medical doctors and leaders in various life sciences fields.
For further information on the Global Life Sciences Practice, please contact Scott Bass (+1.202.736.8684, +1.212.839.5613, firstname.lastname@example.org) or James C. Stansel (+1.202.736.8092, email@example.com).
This Sidley Update has been prepared by Sidley Austin LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300 and One South Dearborn, Chicago, IL 60603, 312.853.7000. Prior results described herein do not guarantee a similar outcome.