MNCs Shift Strategy Amid Original Drug Exits: Focus Turns to Innovation and Growth

Recently, the price increase of a commonly used drug has sparked discussions on social media.

Cefaclor, also known asGSKThe price of cefuroxime axetil tablets has been pushed to per box in online pharmacies.400About RMB. "Last year mid-year30Block, this year2Month80Block,3Month150Block,5Month180Block,7Month280Block, now comes to400"Block!" A post documented the drug's out-of-control price changes over the past year.

This original second-generation cephalosporin, from2019It has not appeared in the centralized procurement list of public hospitals since the year. According to MaxEntropy Pharma data, after losing the centralized procurement bid, the retail sales of Ceftin in pharmacies did not decline consistently:2020-2022Annual growth nearly doubled,2023After a year of decline, in2024Another year of growth.

But even if it sells well in pharmacies,GSKStill in2024Announced in [Year] that this drug would no longer be supplied to the Chinese market.From then on, the supply of goods became dominated by agents and "hoarders," and it was predictable that drug prices would be repeatedly inflated.

This discussion has become part of the wave of "collective withdrawal and price hikes of original research drugs." Similar situations have occurred with other original research drugs: the price of the antihypertensive drug Plendil on e-commerce platforms has doubled compared to the past; the drug Saquinavir for immune diseases has also increased from...30A box used to cost a few yuan, but now it has increased to100Left and right.

Last month,Issued by the National Medical Products AdministrationAnnouncement, Official"Due to the applicationCancellation”80A drug registration certificate.Among which, more than55%Products come from foreign pharmaceutical companies or Sino-foreign joint ventures. This also means that manyMNCFor strategic reasons, GSK is stopping the production and sale of some of its products in China.

Despite the underlying phenomenon being driven by the pressure of centralized procurement, it also reflects companies' proactive choices in the face of such pressures.

First, many drugs still have a way out after exiting the hospital market, and Zinnat is one such example.MNCThe abandonment has other reasons.

A person who has worked in foreign enterprises for many years mentioned that the sales networks of retail and e-commerce are in need.MNCThe team in China was rebuilt. "There are two sets of logic: one for doctors within the hospital and the other for consumers outside the hospital."

"And if they choose to do nothing, they are basically waiting to be eliminated. Once their drugs leave the hospital market, it will be difficult to sell them because the invested resources no longer match. The price level is more of a result rather than an active strategy." "Essentially, it's also a form of survival of the fittest," summarized the aforementioned foreign company representative.

Secondly, the withdrawal of drugs does not mean the withdrawal of enterprises.

Last year, eachMNCOverall performance in China is good.Roche Growth6%、Novo NordiskSales Growth13%、AstraZeneca Growth11%, Lilly Growth9%Novartis delivered growth21%The satisfactory answer relies partly on the self-paying market and partly on innovative products — its innovative drugs.siRNAAlthough the ultra-long-acting lipid-lowering drug Leke has experienced price reductions through national negotiations, it still sold nearly40Excellent results in the billions.

From this perspective, although there is a connection between centralized procurement, drug price increases, and companies exiting the market, they cannot be directly equated.

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Old drugs are not as good as new drugs, and maintaining revenue is not as good as growth.

MNCThere are thousands of strategies in China, but one thing is common:The focus of business and resource investment is shifting towards new drugs.

A salesperson in China for a foreign company said that when foreign pharmaceutical companies formulate new fiscal year plans every year, they will differentiate the "core industries./"Products" and "Non-core (Non-strategic) Products".And so-called non-strategic products are not only not prioritized but even deliberately marginalized.

Take cefuroxime axetil mentioned at the beginning of the article as an example. In the systems of multinational companies, such drugs are defined as "non-strategic products." The headquarters will not allocate excessive budgets for them, nor will they set strict targets for the China team.KPI。In other words — its raison d'être is merely to maintain a minimal level of supply and brand visibility.

The price increase is not a strategic behavior but a "natural market choice." In this situation, "whoever has the goods, and the goods are scarce, naturally the price will go up."

The deeper logic lies in: foreign companies do not want these products to affect the sales rhythm of their core products.

Once the product exits the core strategic scope, it is very likely to be "discontinued" the following year — the Chinese market will no longer be a priority.

Therefore, the fundamental reason for the price increase of cefuroxime axetil products lies in the foreign company's strategy. It is not aimed at gaining higher profits by setting high prices but is determined by its positioning as a "non-strategic product."

This trend is not happening only in the Chinese market. In2010sGenerally, multinational pharmaceutical companies still focus on drugLifecycle Management, StrengtheningblockbusterMaintenance period.And now, apart from the profit collapse caused by the patent cliff, it is happening globallyReform of the Medical Insurance System and Payment MechanismsA Heavy Blow to Old Drugs —— Drug Price Negotiations in the U.S., Europe'sHTAAll of these have made the original drugs that can find substitutes less popular.

And in China,After centralized procurementSome drugs have lost their competitive edge in terms of pricing. For instance, AstraZeneca's older cardiovascular medications, such asSuch as Bo Yin Ding, Bei Lin DaHas faced such crises. After the company's evaluationAndNo independent retail channel established, and instead concentrate resources on non-bulk procurement innovative drugs, such as Dapagliflozin and Empagliflozin, etc.。

The same situation also occurred with Novartis. The old hypertension drug DiovanAfter the centralized procurement, the price dropped dramatically. Novartis attempted to maintain the original price supply through pharmacies in some cities.ButHigh channel maintenance costs, sales not reaching scale, and the need to prevent“Reverse Goods”。Thus,2022After the Year，Novartis Gradually Cuts Cardiovascular Original Research Out-of-Hospital Sales Team, Shifts Focus to Innovative Drugs and Rare Disease Channels.

And the final result is: inOld drugs have almost disappeared from the retail end,MNCMostRelying on innovative drugs to maintain growth.

Another person working at a foreign company mentioned, asMNCEmployees in the China region can only advance or retreat based on strategic goals. When formulating plans for the new fiscal year, core products and non-core products will be distinguished, followed by production scheduling."It is nothing more than being responsible for the stock price and market value." In today's capital market, the driving force behind new drugs is highly favored. As a result, older drugs often fall into the category of non-core products.

"The logic of these foreign pharmaceutical companies is: high prices for non-core products, limited supply, and no concern for sales volume. There can even be some extreme situations: for some non-core products, even if they are in stock, they don’t hope for too large sales volume. If non-strategic products sell too well, it actually indicates that the strategic products haven't sold well, and no resources or budget have been allocated, which would be a systemic issue."

This is why, although drugs like Cefalexin still have a broad market outside of hospitals, the company has chosen to let them go."Because it deviates from the strategic goal, there is 'no fundamental desire to spend time on it'."

The aforementioned foreign company employee also mentioned that, compared to other regions, the Chinese market isMNCHeadquarters have different strategic values in mind."For the European and American markets, maintaining revenue is crucial. But in China, overall growth surpasses everything."One is a profit center, and the other is a growth engine; only when both elements are present can they provide support.MNCThe Complete Narrative.

Therefore, contrary to the popular belief that "drug profits are hurt after centralized procurement so they exit," the majority...MNCWhen measuring the performance in China,More focused on than total revenue“Core Innovation Product Growth Rate”This indicator.

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The Same Centralized Procurement, Different Fates

After understanding the logic of foreign enterprises, one can better understand the impact of centralized procurement onMNCThe meaning.

For many pharmaceutical companies in China, the choice of centralized procurement means "exchanging price for volume." If they don't actively compromise, they may be completely left out of the market. However, for foreign enterprises, centralized procurement is not a necessary option, and "compromise" carries more strategic implications.

"Foreign enterprises need policy trust to operate in China"。ManyMNCThey all choose to sacrifice a few old drugs, participate in the centralized procurement to express a cooperative attitude, in exchange for their new drug approvals, etc.PolicyConvenience."The aforementioned foreign company employee mentioned. The majority of drugs being sacrificed are old drugs that are about to or have already faced competition from generic drugs. Even without centralized procurement, these drugs no longer have much room for growth."

Therefore, it is also common to see this phenomenon: an original research drug that participated in the centralized procurement for a year or two withdraws and gradually disappears in China.For example, Bayer's Glucobay, this1994Hypoglycemic drugs that entered the Chinese market years ago, in2020Participated in the second batch of national procurement in the year, and successfully secured it.16The procurement share of provinces. Two years later, as the contracts expired one after another, Bayer was not seen in the renewal lists of provincial centralized procurement. Following its withdrawal, there were also market phenomena such as price hikes and panic buying.

This is actually a natural outcome following the drug lifecycle. It's just that the centralized procurement has expedited this process.

CorrectMNCFor them, instead of depleting resources in price wars, it is a wise choice to seize the opportunity of centralized procurement to gain policy favor, withdraw in time, and concentrate R&D, production, and channel resources on innovative drugs within the patent period and high-potential products — such as Novartis' focus on the nuclear medicine field, and Eli Lilly's...GLP-1Such drugs, Roche's ophthalmology bispecific antibodies, etc., these are the "foundation" of foreign enterprises in China.

Of course, there are also foreign companies that voluntarily include their new drugs in the national negotiations. This situation basically occurs in fields with frequent innovations, where major pharmaceutical companies are engaged in high-quality competition.

For high-priced new drugs,MNCOften face obstacles in covering the Chinese market. Therefore, accepting significant price discounts in exchange for inclusion in the medical insurance catalog, hospital usage systems, and out-of-hospital channel coverage is also a strategic choice: even if the gross profit margin decreases, it gains volume, channels, and market presence. Especially in the field of oncology, as there are more and more innovative drug competitors from China, foreign companies must make price adjustments that align with the economic situation of Chinese patients.

"Actually, many people's anxiety about the withdrawal of original research drugs from China is concentrated on old drugs, not new ones.""The phenomenon is very interesting. It also shows that the weight of foreign original drugs in the hearts of Chinese consumers mainly comes from years of reputation and brand effect, rather than innovation capability."

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MedicineReconstruction of Price Logic: From Original Research Premium to Innovation Squeeze

Over the past decade, China's drug prices have undergone a dramatic restructuring. Medications for major diseases such as prostate cancer, which once cost five hundred thousand yuan per course of treatment in the early years, then dropped to over one hundred thousand yuan, and now patients only need to pay a few thousand yuan out-of-pocket per course. National health insurance negotiations, domestic alternatives, and centralized procurement price reductions have collectively driven an era of "drug price restructuring."

Among them, price restructuring includes innovative compression and partial reduction of premium for original research drugs.

However, when prices are restructured, new issues begin to surface:In this "Post-Premium Era," who can still survive in China's pharmaceuticals market?

A pharmaceutical industry practitioner said, "In the minds of most ordinary people, they actually don't understand what original research drugs are, they only know imported drugs."

Over the past decade, the clinical efficacy of Chinese-produced drugs has continuously improved, but in the minds of some patients and doctors, imported drugs are still regarded as "more reliable" and "safer." This psychological premium constitutes a "trust gap" that has long existed in China's pharmaceutical market.

Even though domestically produced drugs are covered by medical insurance and are cheaper, some patients are still willing to pay an extra premium for the "imported" label. As a result, the market has formed a bipolar pattern: the in-hospital market: covered by medical insurance, using low-cost drugs; the out-of-hospital market: utilizing online channels, maintaining high-end brands.

In the new market scenario, a group of experienced pharmaceutical agents have found new profit growth points based on people's psychological needs.

"Now, on the contrary, some original research drugs can make money as long as they are in stock," said a pharmaceutical agent. In their view, some "original research drugs," which foreign companies no longer prioritize or reduce resource investment in, have become new growth points for pharmaceutical agents.

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