CHINA TO INTRODUCE OTC PRICING REFORMS

In the wake of soaring drug prices in recent years, China's powerful National Development and Reform Commission (NDRC) is to decentralise the prices of OTC pharmaceuticals. So-called "Group B" drugs, which are non-reimbursable but sometimes contain powerful APIs, are expected to have their prices set at the provincial level from August 1. The NDRC will continue to price reimbursable "Group A" drugs at the national level.

Some industry sources have voiced concerns that allowing provincial authorities to price non-prescription drugs could lead to "unfair competition," while foreign drugmakers have protested plans for new sector-wide price cuts. Since 1998, the Chinese authorities have reduced drug prices heavily, cutting annual market value by at least US$1.3bn. The NDRC now proposes to cut median Group B drug prices by 60%, although branded off-patent drugs manufactured by foreign firms would see an average price cut of 25%. Patented product prices would fall by 20%.

Currently, provincial authorities are only permitted to adjust OTC drug prices by 5%, although under the new plans provincial price differences would be equalised, at least partly preventing the threat of parallel trading. Nevertheless, many Western drugmakers are unenthusiastic, especially in view of a retail price ceiling on around 200 high-value drugs imposed in 2003.