Innovating Sales Strategies for Former Star Diabetes Companies under China's 4+7 Volume-Based Procurement Policy
Recently, media outlets have raced to report on the imminent announcement of the second batch of volume-based procurement. Currently, all “4+7” cities have issued detailed implementation rules for volume-based procurement, and the first round of centralized drug procurement has already been implemented in these cities. Volume-based procurement has long attracted significant attention from the pharmaceutical industry and has profoundly reshaped the landscape of the diabetes market.
According to the latest statistics from China's National Health Commission, the number of people with diabetes in China exceeds 114 million, with a prevalence rate as high as 10.9%. This accounts for 25% of the global total of diabetic patients. The number of diabetic patients in China is projected to rise to 120 million by 2045.
The vast patient population continues to drive up the market size of diabetes, with global total healthcare expenditures for diabetes reaching $727 billion in 2017. Faced with enormous demand, the diabetes market has also become a fiercely contested arena for pharmaceutical companies with development potential.
Faced with such intense competition, it is impossible to win in volume-based procurement (VBP) without certain R&D capabilities, production efficiency, and superior cost control. In the context of the first batch of the “4+7” VBP for pharmaceuticals, what changes have occurred in the distribution channels of these multinational pharmaceutical companies? What impacts have arisen? How should diabetes-focused pharmaceutical companies respond to the new challenges?
On the evening of December 7, 2018, the results of the centralized volume-based drug procurement pilot program in the “4+7” cities were announced, with only 25 out of the 31 bidding varieties selected. The implementation of volume-based procurement has played a significant role in reducing drug prices, but it has also posed new challenges for pharmaceutical commercial enterprises.
Volume-based procurement refers to the process in centralized drug procurement where, during bidding or price negotiations, specific purchase volumes are clearly defined. Enterprises submit bids based on these specified quantities, with the lowest bidder winning the contract, provided that the drugs have passed the consistency evaluation.
The most significant difference between this “volume-based centralized procurement” and previous provincial-level centralized tendering and procurement lies in the fact that it is led at the national level and implemented on the basis of phased progress achieved in the consistency evaluation of generic drugs.
First, the distinction between originator drugs and generics will be eliminated, encouraging the substitution of originators with generics to alleviate the financial pressure that high-priced originator products impose on medical insurance funds. Second, price reductions are inevitable for all drug categories. Finally, an increasing number of drugs will pass the consistency evaluation in the future, leading to an expansion of the scope of volume-based procurement, while drugs failing to meet the consistency evaluation criteria will be directly phased out.
China has become the undisputed “global leader in diabetes prevalence,” driving substantial demand for antidiabetic medications. Under the impact of volume-based procurement (VBP) under the national medical insurance scheme, the business models of pharmaceutical companies specializing in diabetes treatments may undergo restructuring. Whether among upstream originators and generic drug manufacturers or midstream pharmaceutical distributors, market concentration is poised to accelerate significantly, with an oligopolistic “winner-takes-all” landscape potentially already emerging.
Currently, the global diabetes market is dominated by four major players—Novo Nordisk, Eli Lilly, Sanofi, and Merck & Co.—with a combined market share (CR4) exceeding 70%, which is projected to increase further by 2024. China’s terminal market for oral and injectable hypoglycemic agents exceeds RMB 40 billion, with alpha-glucosidase inhibitors, sulfonylureas, and biguanides accounting for the majority of the market share. Unlike other countries, China’s diabetes market features a wide variety of oral hypoglycemic agents; however, most of these drugs are original innovations developed by foreign pharmaceutical companies and have already secured a dominant position in the domestic market.
With over 90 years of history, Novo Nordisk has remained dedicated to the research and development of diabetes medications, holding an undisputed leading position in the field of insulin. Currently, insulin constitutes its largest revenue-generating therapeutic category, accounting for approximately 70% of total pharmaceutical sales. In the insulin segment, Novo Nordisk continues to innovate, with its newer products Tresiba (insulin degludec) and Ryzodeg (insulin degludec/insulin aspart) sustaining robust growth. Regarding novel therapies, the company’s flagship GLP-1 receptor agonist Victoza (liraglutide) has faced some competitive pressure from Eli Lilly’s Trulicity (dulaglutide); however, its newly launched drug Ozempic (semaglutide), introduced in late 2017, has garnered significant global attention. Novo Nordisk’s market leadership is expected to remain unshaken in the near term and will continue to be consolidated as the company develops.
As the world’s first company to commercialize insulin, Eli Lilly ranked third in 2017. However, given its current strong upward momentum, it is poised to surpass Sanofi and claim the second spot in 2018. Its flagship product, Humalog (insulin lispro recombinant), has achieved global annual sales exceeding $2 billion for the past three consecutive years. Ranking second among its products is Trulicity (dulaglutide), a long-acting formulation requiring only once-weekly injections, with sales having doubled for two consecutive years. In addition, Basaglar (insulin glargine analogue), recently launched on the market, has realized fourfold growth. Compared with other competitors, Eli Lilly’s prominent advantage lies in its robust pipeline of new drugs and their strong market performance.
Sanofi, another long-established player in the field of diabetes medications, boasts a more comprehensive product portfolio. Its flagship product, Lantus (insulin glargine), dominated the diabetes market for over a decade but now faces the risk of patent expiration. In 2017, its sales declined rapidly due to competition from similar products by Eli Lilly. To reverse this downturn, Sanofi has accelerated the research, development, and promotion of a series of innovative diabetes drugs.
Compared with its three competitors, Merck & Co. focused on the oral hypoglycemic agent market and held a dominant position in the DPP-4 inhibitor segment. The company’s flagship product was Januvia (sitagliptin); however, as its patent expired, omangiptin, a newer drug developed through substantial R&D investment, failed to gain approval in the United States and Europe. These factors contributed to a decline in the company’s market share in 2017.
As the “4+7” volume-based procurement program and other healthcare reform policies advance, pharmaceutical commercial enterprises are facing increasingly severe disruptions. Under the impact of volume-based procurement, so-called resource sharing and business synergy will give way to ruthless survival-of-the-fittest competition, accelerating industry consolidation and ultimately achieving capacity reduction. How should multinational pharmaceutical companies, which hold a dominant position in the diabetes market, respond? In particular, what adjustments have they made on the sales front—balancing market share and pricing—to seek new growth engines?
Traditionally, pharmaceutical companies have relied on three primary channels for communication. The first is academic conferences, which facilitate peer-to-peer information exchange among physicians. The second is professional detailing, where medical representatives and medical science liaisons visit target healthcare providers to deliver scientific and clinical information. The third comprises non-personal communication channels that do not involve direct human interaction. Traditional communication models often yield limited conversion rates, prompting pharmaceutical companies to continuously explore new engagement strategies.
In 2016, Novo Nordisk proposed a 3D model that shifted from a “physician-driven” approach to a “patient-centric” one, placing patients at the core of its communication strategy and launching the “Diabetes Network” on both PC and WeChat platforms. Within an evaluation framework based on key metrics such as user engagement, push notification frequency, content quality, and additional features, the “Diabetes Network” WeChat official account has consistently ranked first in the industry.
It is understood that "Diabetes Network" is a non-profit health platform dedicated to diabetes, committed to providing the latest and most comprehensive diabetes information to patients across China, disseminating authoritative knowledge about diabetes, and promoting correct concepts of diabetes treatment, with the aim of making a proper contribution to diabetes patient education in China. Currently, its two WeChat official accounts, "Diabetes Network" and "Tangyi Network," have consistently served as industry benchmarks, boasting a substantial user base within the sector and demonstrating innovation in both content and format. For instance, textual content on the platform is accompanied by voice-over audio, enabling users to listen to the articles, thereby achieving more effective communication through the organic integration of audio and text.
“Due to low public awareness of diabetes, delayed diagnosis and treatment, and inadequate disease control, the economic burden of diabetes management is significant. Therefore, society as a whole should work together to enhance diabetes awareness, promote early diagnosis, early intervention, and effective disease control. This approach will not only reduce costs but also alleviate the overall burden on healthcare expenditures,” said Zhou Xiaping, Senior Vice President of Novo Nordisk and President of Greater China.
The so-called "patient-centric" 3D model refers to: Drug, Data, and Device.
In the chronic disease management of diabetes, medication is a critical component. Furthermore, data on patients’ medications, diet, and exercise can be input as health data to reflect their real-time health status, generating outputs such as blood glucose levels and other diabetes-related health indicators. Mobile health platforms can integrate medication data, lifestyle-related dietary and physical activity data, and health metrics like blood glucose into a single platform. By leveraging data-driven guidance and artificial intelligence-assisted interventions, these platforms ultimately help patients achieve better disease management.
In the era of new media, mobile health has found new breakthroughs in communication. Mass-appeal formats such as WeChat official accounts and short-form videos are playing an increasingly important role in pharmaceutical companies’ communication strategies. As a leader in the diabetes field, Novo Nordisk collaborates with third parties annually to produce educational videos on diabetes and insulin therapy, communicating with patients and the public through accessible language and approaches to enhance disease awareness. Statistics show that the videos co-produced by Novo Nordisk have reached millions of people, a scale difficult for traditional offline education and communication channels to match.
Meanwhile, Sanofi has also launched its digital strategy in China, focusing on multi-channel engagement and integrated patient services; Merck has partnered with Tencent to develop intelligent digital healthcare services in China; and Eli Lilly China has collaborated with Tencent and DXY to jointly develop initiatives such as the “Eli Lilly Diabetes Youxing Care Project.”
In addition to innovating communication models, pharmaceutical companies specializing in diabetes are also actively pursuing innovation. Novo Nordisk has upgraded its R&D innovation strategy by increasing investment in expert biological sciences and technological advancements, enhancing automation and digital capabilities, leveraging machine learning and artificial intelligence to improve R&D efficiency, and seeking more innovative treatment solutions through external collaborations.
In an increasingly competitive environment, the number of domestically developed innovative diabetes drugs continues to rise. For instance, Jiuzhitang has not only expanded into the field of innovative diabetes therapies but also holds equity in Kexin Meiwu. REMD-477, a drug under development for type 1 diabetes, shows potential as an alternative to insulin, making its outcomes highly anticipated. Another example is Tonghua Dongbao, a leading domestic manufacturer of recombinant human insulin, which is strategically positioning itself in third-generation insulins; its glargine insulin is expected to receive approval in the first quarter of next year, opening up new avenues for revenue growth.
Under the influence of policies such as volume-based procurement, the entire pharmaceutical industry chain is undergoing restructuring. Integration among platforms, coordination between upstream and downstream sectors, and cross-industry collaborations are becoming increasingly frequent. In this era of growing complexity, diabetes-focused pharmaceutical commercial enterprises must proactively align with policy developments, properly address issues and challenges in the diabetes market, and maximize opportunities while mitigating risks. Patient-centric sales innovations have ushered in a new phase in which diabetes pharmaceutical companies take proactive measures to respond to challenges. Moving forward, identifying new business models and new profit growth points remains a top priority for pharmaceutical companies seeking sustainable development.