Official Announcement: Provisional Winning Bidders of the Third Round of National Drug Centralized Procurement Released (With Full List)

Late last night (August 20), the Shanghai Joint Procurement Office released the proposed winners of the third national centralized drug procurement:

Public Notice of the Proposed Award Results for the National Centralized Drug Procurement (Procurement Document No.: GY-YD2020-1). During the public notice period, any objections shall be submitted to the Joint Procurement Office along with lawful and valid evidentiary materials before the expiration date. Late submissions will not be accepted. In principle, the Joint Procurement Office will not accept complaints lacking corresponding evidentiary materials.

Public Notice Period: August 21, 2020 to August 23, 2020

Application Period: August 21, 2020 to August 23, 2020

After a day of tumult and as the dust settles, the official preliminary results of the third round of centralized procurement, which has triggered a new wave of upheaval in the pharmaceutical industry, have finally been announced.

Highly Competitive Products, Prices as Low as 1 Fen

It is reported that for the 55 generic drug varieties involved, the average price reduction exceeded 70% compared to the highest effective declaration price, with the maximum reduction reaching 98.72%. According to data from Menet, 16 varieties experienced drastic price cuts, with reductions exceeding 90%.

Calculated on a non-differential price comparison basis, Saibailan compared the proposed winning bid unit prices of all pharmaceutical companies and found that ultra-low prices were mainly concentrated in two varieties: Metformin Hydrochloride Tablets and Captopril Tablets.

Notably, Chongqing Kerui Pharmaceutical implemented a "drastic price-cutting" bidding strategy, securing the two lowest unit-price items in the third batch of centralized procurement. The proposed winning bid price for Captopril Tablets (25mg*84 tablets) was RMB 0.014 per unit, and that for Metformin Hydrochloride Tablets (0.25g*84 tablets) was RMB 0.015 per unit, both hitting rock-bottom prices.

For the captopril category, a total of eight companies were awarded bids, with most achieving ultra-low prices—the highest winning bid was 0.03 yuan from Changzhou Pharmaceutical Factory, while the quotes from all other companies were generally in the range of 0.01 to 0.03 yuan.

To some extent, intense competition inevitably leads to cutthroat price wars.

More than 11 companies met the eligibility criteria for immediate-release oral metformin, extended-/controlled-release metformin, and captopril (28 for immediate-release oral metformin, 19 for extended-/controlled-release metformin, and 12 for captopril), but no more than 8 could be selected as winners.

In terms of reported procurement volumes, metformin immediate-release oral formulations accounted for the highest volume among all products, reaching 4.66 billion tablets and representing 23.3% of the total reported volume. Given this substantial procurement scale, at least 20 companies are destined to be eliminated, and such a high elimination rate will inevitably trigger intense price competition among manufacturers.

Data show that the average price reductions for three major varieties—metformin immediate-release oral formulations, metformin sustained- and controlled-release formulations, and captopril immediate-release oral formulations—were 82%, 71%, and 93%, respectively.

Just as there are fiercely competitive product categories, there are also those with relatively “comfortable” competition. For instance, Moxifloxacin Sodium Chloride Injection had a maximum procurement volume of RMB 1.759 billion, ranking first among the 56 product categories, yet only three companies—Bayer, Tianjin Chase Sun Pharmaceutical, and Hainan Aike Pharmaceutical—met the eligibility criteria for submission.

Ultimately, Bayer was eliminated with a bid price of RMB 98.88 per sachet. Tianjin Chase Sun Pharmaceutical and Hainan Aike Pharmaceutical shared this largest procurement market in China. Neither had previously held any hospital market share, allowing them to rapidly establish their market presence through the volume-based procurement program.

Furthermore, the maximum procurement volume for oral immediate-release formulations of mecobalamin reached RMB 1.192 billion, ranking fifth. With a limited number of domestic manufacturers having passed the consistency evaluation, the competitive landscape is relatively favorable. The originator is Eisai, and there are two domestic manufacturers that have passed the consistency evaluation, including Yangtze River Pharmaceutical Group and Qingfeng Pharmaceutical.

Ultimately, Eisai (the originator) and Jiangxi Qingfeng Pharmaceutical each captured half of the market at prices of RMB 0.16 per tablet and RMB 0.176 per tablet, respectively, while Yangtze River Pharmaceutical failed to win the bid.

Lamivudine was the only product for which the bidding company failed to win the bid. A total of six companies, including the originator, participated in the bidding, with a maximum ceiling price of CNY 0.2 per tablet. The failure to secure the bid despite participation by six companies may be attributed to the relatively small procurement volume for this product.

Originator Drugmakers Exit, Domestic Firms Engage in Fierce Competition

Judging from the final proposed winning bid results, leading domestic pharmaceutical companies in the first tier were the main force in this volume-based procurement, while originator drug manufacturers withdrew one after another.

Menet Network analyzed the top 10 pre-selected companies for varieties in the third national centralized drug procurement. These companies are predominantly leading domestic pharmaceutical enterprises with robust product portfolios and advantages in active pharmaceutical ingredients (APIs). Among them, Qilu Pharmaceutical and CSPC each secured pre-selection status for eight varieties, while Yangtze River Pharmaceutical Group, Shanghai Pharmaceuticals Group, and Sino Biopharm each secured seven varieties, emerging as the major winners of this procurement round. Hengrui Pharma and Hansoh Pharma, both holding multiple Class 1 new drugs, secured pre-selection for four and five varieties, respectively.

(Image source: Menet)

It is worth noting that these pharmaceutical companies are also at the forefront of the domestic consistency evaluation process, a harvest brought about by their precise strategic layout in response to national policies.

Huahai Pharmaceutical has once again emerged as a winner in the centralized volume-based procurement (VBP) following the "4+7" pilot program, with all three of its VBP-listed products—Valsartan Tablets, Olanzapine Orally Disintegrating Tablets, and Sertraline Hydrochloride Tablets—successfully awarded bids. Given the company’s previously limited market share and its significant advantages in active pharmaceutical ingredient (API) production, it is poised for greater profit margins in the future.

As an active responder to the national centralized procurement policy, Qilu Pharmaceutical has once again secured proposed winning bid status for eight products. Since the expansion of the first batch of volume-based procurement, Qilu Pharmaceutical has become known in the industry for its "aggressive price-cutting" bidding strategy. This is partly because its self-produced active pharmaceutical ingredients (APIs) and vertical integration effectively reduce costs. On the other hand, many of its products are promoted through an agency model, where there was already a discrepancy between the ex-factory price and the winning bid prices in previous tenders. Although the price cuts appear substantial, the actual reduction from the ex-factory price is minimal. Instead, the company stands to benefit from increased market share.

Overall, among the winners of the third batch of national centralized procurement, being the first to pass the consistency evaluation marks the beginning of all competition. Enterprises must make scientific decisions based on market information and plan ahead. The future leaders in China’s national centralized procurement are likely to be companies like Qilu Pharmaceutical, which have a larger number of products that have passed the consistency evaluation.

In stark contrast to domestic companies, multinational pharmaceutical firms remain largely unenthusiastic about participating in the national centralized drug procurement program.

Many originator pharmaceutical companies exhibited a clear "participation-only" mindset, with bid prices even exceeding the maximum effective declaration price. According to data compiled by Menet: Novartis’s letrozole (bid price vs. maximum price cap: RMB 36.3/tablet vs. RMB 9.528/tablet); Roche’s capecitabine (bid price vs. maximum price cap: RMB 24.833/tablet vs. RMB 7.6667/tablet); Eli Lilly’s olanzapine orally disintegrating tablets (bid price vs. maximum price cap: RMB 18.559/tablet vs. RMB 9.257/tablet); Bristol-Myers Squibb’s metformin tablets (bid price vs. maximum price cap: RMB 1.4/tablet vs. RMB 0.2/tablet).

Currently, only Pfizer, Eisai, UCB, and Teijin Pharma are proposed as the selected candidates for linezolid, mecobalamin, levetiracetam concentrated solution for injection, and febuxostat, respectively.

Pfizer’s semi-annual report released in the past couple of days may have provided insights into how originator pharmaceutical companies can market originator products included in volume-based procurement, thereby boosting confidence.

Pfizer’s 2020 semi-annual report shows that in the second quarter of 2020, Upjohn China’s revenue increased by 17% year-on-year, mainly driven by Lipitor and Norvasc. Although these two drugs were excluded from the volume-based procurement program, their sales performance remained strong.

For multinational pharmaceutical companies, pricing strategies must fully account for corporate and product-level considerations. Companies are concerned that submitting a bid, regardless of whether it is successful, could impact future sales prices. Therefore, unless they are confident of winning, they will not readily participate in the bidding process.

This has led to the current situation, where most originator drug companies are merely participating without winning bids, while domestic companies compete for market share. Undoubtedly, the successful bidding of these domestically produced generic drugs at the lowest prices with the highest discounts will achieve clinical substitution for corresponding high-priced off-patent products from multinational corporations. For these 55 varieties, most of which are currently dominated by originator drugs in terms of market share, the future market landscape is poised for rapid transformation.