Getting High on China: The High Cost of Low-Priced Drugs for Pharma Firms?

Recently, foreign pharmaceutical makers such as AbbVie, AstraZeneca, Novartis, Sanofi, and Roche slashed the prices of a large number of drugs sold in China, the world’s second largest drug market. They cut prices far below their prices in the United States (US) and elsewhere so Beijing would put these drugs on China’s national reimbursement list, which means 1.3 billion plus individuals can use their national insurance plan to pay for the cost of these drugs. The China market appeals not only because of its scale (it is a USD $130 billion market per some reports), but also because China’s population is rapidly aging and getting wealthier (which has affects the consumption of drugs and expectations about the quality of care), and the number of people suffering from “rich world diseases” like cancers, diabetes, and high cholesterol is increasing. Moreover, while companies did not cut the prices of some drugs, “playing the game” vis-à-vis other drugs at a time when China needs to put a ceiling on the amount spent on drugs and deliver better treatments, could facilitate the approval of so-called innovative drugs and increase the amount Beijing has to spend on these pricier products. Some worry about the impact of price cuts on pharmaceutical firm profits, particularly for some whose research and other costs are rising, while others fret that pharmaceutical companies might make themselves vulnerable to criticism in other countries where they have not lowered prices. Long forgotten are the travails of GlaxoSmithKline which paid an almost $500 million fine in 2014 for bribery, bribery in the service of selling pharmaceutical and other products in a closed/corrupt market. Today’s more “open” one may be costly, but cheaper in other important ways. There will be plenty of ways for foreign drugs firms to get high on the China market.