Results of Provincial Alliance Volume-Based Procurement for Six Major Drug Products Announced

1、6 Major Drug Products, Volume-Based Procurement Results Announced

Yesterday (June 28), the Guangxi Drug Group Procurement Service Platform issued the 《Notice of the Office of the Autonomous Region Drug Group Procurement Working Group on Effectively Implementing Inter-Provincial Alliance Volume-Based Procurement and Use》 (hereinafter referred to as the “Notice”).

The 《Notice》 indicates that the winning results of the inter-provincial alliance volume-based procurement for six major drug varieties have been announced and will soon take effect. According to an analysis by Sai Bailan, all six drugs are injectables that have not yet passed the consistency evaluation, with a total of eight manufacturers involved.

Among the selected products, there are quite a few with substantial sales revenue. According to data from Menet, in 2020, the sales of Compound Amino Acid Injection (18AA) at healthcare terminals in China—including urban public hospitals, county-level public hospitals, urban community health centers, and township health centers—exceeded RMB 4.27 billion. Implementing volume-based procurement for products with high sales volumes will inevitably exert a greater market impact.

The notice indicates that, in accordance with the relevant provisions of the 《Inter-Provincial Alliance Centralized Volume-Based Procurement Document for Pharmaceuticals》, the procurement cycle for this round shall be one year in principle. Depending on factors such as the actual fulfillment of procurement volumes for specific drug varieties across the region, the procurement cycle may be appropriately adjusted. If medical institutions continue procurement after meeting the agreed procurement volume within the procurement cycle, the winning enterprises must still supply the drugs at the winning price. In other words, even if a drug is included in the volume-based procurement program, the duration of the procurement cycle remains uncertain. Moreover, for drugs listed in the volume-based procurement catalog, prices cannot be raised simply because the procurement cycle has ended. This places higher requirements on pharmaceutical enterprises.

2、Drugs not yet passing the consistency evaluation must also undergo price reductions.

Conducting inter-provincial alliance volume-based procurement for drugs that have not passed the consistency evaluation is actually not the first time. In November 2019, the State Council issued the “Notice on Several Policy Measures to Further Deepen the Reform of the Medical and Healthcare System with Centralized Procurement and Use of Drugs as a Breakthrough”, which stipulates that for drugs not included in the scope of national centralized procurement — localities may draw upon the experience of national centralized drug procurement and use, adopt approaches such as independent or cross-regional alliances, and intensify reform and innovation in areas including procurement scope, qualification criteria, and centralized procurement models.

According to incomplete statistics from Saibailan, provinces across China, including Anhui, Hainan, and Fujian, have already implemented volume-based procurement for drugs that have not passed the consistency evaluation.

China’s national centralized drug procurement program has now advanced to its fifth batch, encompassing 218 selected drug varieties. Although the price reductions are substantial, they constitute only a tiny fraction of the vast pharmaceutical market. Drugs that have not yet passed the generic drug consistency evaluation still retain significant market presence. Among these, several are essential medicines, reflecting enormous clinical demand. As national centralized procurement strictly requires drugs to have passed the consistency evaluation, provincial or inter-provincial alliance centralized procurement mechanisms are being utilized for non-evaluated drugs that command substantial market shares. By implementing volume-based procurement for these products, the aim is to achieve price reductions and thereby reshape the market landscape for drugs pending consistency evaluation.

It is widely recognized that the inclusion of pharmaceutical products in volume-based procurement inevitably leads to price reductions. While this can rapidly capture market share in the short term, the development of pharmaceutical companies' sales teams will face a markedly different landscape compared to the past.

Regarding this issue, Ma Wanqi, a contributing author for CyberBlue, noted that compared to the scale and practices of sales teams previously driven by kickbacks, it is essential for pharmaceutical companies to steer their operations and their impact on market order back toward rationality. First, therapeutic efficacy and price remain the core competitive advantages of drugs. However, due to their status as special commodities, companies must continue to provide comprehensive service support for both in-hospital and out-of-hospital markets, and sustain channel development for both volume-based procurement (VBP) and non-VBP segments. Second, the integration models of innovative drugs, generics, and the medical insurance drug market each exhibit distinct characteristics. Innovative drugs are generally exempt from VBP, whereas generics are increasingly subject to comprehensive centralized procurement. Given this established trend, VBP is unavoidable, and the crackdown on kickback-driven sales is being rigorously enforced. Therefore, companies must prioritize finding a balance between strict policy compliance and sustainable market operations. These are the practical challenges facing the industry; under the principle of survival of the fittest, companies that refuse to adapt face a significantly higher risk of elimination.

As can be seen, passing the consistency evaluation presents future opportunities and eligibility for national centralized procurement, while failing to do so carries the risks of being delisted from procurement platforms and having drug approval documents revoked. Consequently, whether to apply for the consistency evaluation for a drug has become a critical strategic decision for pharmaceutical enterprises.

3. Passing the Consistency Evaluation Poses a Challenge

In the current market, for some pharmaceutical companies, it is not that they are unwilling to complete the consistency evaluation, but rather that the corresponding reference listed drugs (RLDs) are unavailable.

Taking Levofloxacin and Sodium Chloride Injection, a selected product in the Fifth National Centralized Drug Procurement, as an example, although it has passed the consistency evaluation, the notice issued by the Joint Procurement Office indicates that the declared procurement volume for Levofloxacin and Sodium Chloride Injection comprises seven strengths: 0.25g, 0.5g, 0.1g, 0.2g, 0.3g, 0.4g, and 0.75g. In the Fifth National Centralized Drug Procurement, six companies, including Southwest Pharmaceutical Co., Ltd., have already won the bid for Levofloxacin and Sodium Chloride Injection.

A search by Ciyao Lan reveals that the reference listed drug and the specifications that have passed the consistency evaluation for levofloxacin and sodium chloride injection are 50 mL:0.25 g and 100 mL:0.5 g, neither of which corresponds to the essential medicine specifications. According to the National Essential Medicines List (2018 Edition) issued by the National Health Commission, the essential medicine specifications for levofloxacin and sodium chloride injection are: large-volume infusions of 100 mL:0.2 g and 250 mL:0.5 g, and small-volume injections of 2 mL:0.2 g and 5 mL:0.5 g.

Due to historical legacy issues, certain drug specifications lack reference preparations; consequently, no products under these specifications have yet passed the consistency evaluation, rendering them ineligible for inclusion in the national centralized procurement.

In this regard, the aforementioned industry expert continued to analyze and point out, “For certain pharmaceutical products that have been on the market for an extended period and command a substantial market size, such as Levofloxacin Sodium Chloride Injection, the challenges associated with reference listed drugs may impact the pace of R&D and production to some extent, but this is not insurmountable. The experience from the centralized procurement case of Levofloxacin Sodium Chloride Injection demonstrates that opportunities are reserved for well-prepared companies.”

In fact, apart from injectables, it is also highly challenging for biologics to pass the consistency evaluation. Due to the complexity of their manufacturing processes, it is not feasible to establish quality consistency evaluation standards for biologics in the same manner as for chemical drugs. Consequently, biologics are difficult to incorporate into large-scale centralized volume-based procurement.

Regarding the inability of certain drugs to pass the consistency evaluation, the aforementioned experts further advised that companies should recognize the opportunities these products still present and make strategic arrangements early to avoid being put on the defensive. For products that have not yet passed the evaluation for the time being, companies must still uphold rigorous quality standards, as quality issues remain the most devastating threat capable of crushing an enterprise. Companies can continue to leverage their competitive advantages across multiple operational areas, including supply chain management and market pricing.

Although drugs that have not passed the consistency evaluation still retain certain market opportunities, State Council directives have long stipulated that once three or more manufacturers of the same drug variety pass the consistency evaluation, non-evaluated generic drugs will no longer be selected. This means that for drugs listed on the centralized procurement platform, if the number of generic drugs that have passed the consistency evaluation exceeds three, non-evaluated generics will be directly excluded from procurement, provided that a stable supply is ensured.

Driven by policies such as national centralized procurement and the consistency evaluation, it remains uncertain whether drugs that fail to pass the consistency evaluation will be permitted to enter the market in the future. Against this backdrop, accelerating the process of passing the consistency evaluation is highly necessary for pharmaceutical enterprises.