2015 will be a major year for essential-drug bidding. Due to policy uncertainty and a variety of influencing factors, the 2014 essential-drug bidding process was effectively stalled, making the 2015 bidding process all the more imperative.

2015 will be a major year for essential-drug bidding. Due to policy uncertainty and a variety of influencing factors, the 2014 essential-drug bidding process was effectively stalled, making the 2015 bidding process all the more imperative.

　　Accelerated tendering is imminent across the country.

　　Based on the practice of essential-drug procurement bidding, the “dual-envelope system” pioneered by Anhui Province has become the mainstream model for such bidding across provinces. However, the initial “Anhui model,” with its overly lenient requirements for technical and economic proposals, led to a vicious cycle in which companies won bids through excessively low pricing. This “price-only” bidding approach subsequently gave rise to a series of problems, including concerns about drug quality and shortages of commonly used, low-priced medications.

　　Subsequently, several provinces have refined the commercial-bid evaluation stage. For example, Beijing’s tendering policy stipulates that, in addition to awarding the contract to the lowest-priced bidder, two pharmaceutical companies that both achieve the highest combined scores in the technical–economic and commercial evaluations will also be awarded the contract. Meanwhile, Jiangsu, Fujian, Ningxia, Gansu, and Qinghai provinces first group essential medicines by quality prior to tendering. These “variants” of the dual-envelope system essentially place greater emphasis on the technical and quality aspects of the competing drugs. In addition, Shanghai and Chongqing have adopted a comprehensive scoring system: for instance, in Shanghai’s tendering policy for essential medicines, the technical score—covering quality, reputation, and service—accounts for 70% of the total, while the price score accounts for 30%. Compared with the dual-envelope system, the technical and quality attributes of the drugs play a more dominant role in the tendering and procurement processes in Shanghai and Chongqing.

　　At the beginning of 2015, the latest updates from provincial procurement platforms revealed that several provinces rushed to release their centralized procurement lists for essential medicines before the year-end. Provinces such as Shandong, Hunan, Fujian, and Hubei have already initiated related work, including the review and management of distribution enterprises and pharmaceutical products, signaling that tendering processes across the country are set to accelerate.

　　Which varieties have advantages?

　　The centralized drug procurement system has now been in place for 16 years. This evolution can be divided into three phases: 2000–2004, the institutional establishment phase; 2005–2009, the exploration phase; and 2010–2014, the standardization phase. Since 2015, the system’s design has entered a fourth phase—the enhancement phase—marking a period of further refinement and improvement of the overall model.

　　Looking at the centralized procurement models for essential medicines across multiple provinces, the “dual-envelope” bidding system has already been implemented in many regions. At the same time, the practice of awarding contracts to the lowest bidder remains unchanged, and this crude, low-price–only approach to tendering has drawn widespread criticism.

　　Some provinces have implemented volume-based procurement for essential medicines, linking purchase volumes to prices, which may exert downward pricing pressure on products with large clinical usage. Given the high rate of essential medicine availability in primary-level hospitals, the drug-use market at these facilities more accurately reflects the actual clinical utilization of essential medicines.

　　Relevant data show that, among county-level public hospitals, systemic anti-infective drugs and gastrointestinal metabolic drugs rank first and second, respectively, in terms of sales share, with cefuroxime and acarbose accounting for the largest proportions. The following analysis compares the winning bid prices of cefuroxime (750 mg specification) and acarbose (50 mg × 30 tablets) across different manufacturers.

　　As shown in Chart 4, the winning bid prices for the foreign-originated proprietary drugs Anke Xin and Baytangping are significantly higher than those of domestic products. All four brands have experienced price declines; over the six-year period from 2008 to 2014, the average annual decline for Anke Xin and Baytangping was less than 1%, whereas the domestically produced conventional formulation of Dalixin’s cefuroxime saw a decline of 10.55%. Meanwhile, Beixi, also a domestic brand, is the sole capsule formulation of acarbose, yet its price decline remains lower than that of Baytangping, demonstrating that exclusive dosage forms can deliver cost advantages in the bidding process.

　　For a long time, originator drugs developed by foreign companies have enjoyed “super-national treatment” in drug tendering and other pricing policies. However, as the R&D capabilities, product quality, and market scale of domestic firms continue to improve, several drug categories have already broken the monopoly held by foreign firms. Currently, the National Essential Medicines List is increasingly including more originator products from foreign companies, while some provinces are implementing a “top-down and bottom-up coordinated” approach. This will directly affect the price competitiveness of foreign-originated drugs in the domestic market, particularly at the primary-care level.

　　Wind vane>>>

　　Hunan Tender: Different Treatment for Different Varieties

　　At the end of January 2015, the Hunan Pharmaceutical Procurement Platform successively released the decrypted bid prices for the first and second rounds of centralized drug procurement negotiations, totaling 19,771 entries covering 11,296 drug varieties, including 1,848 essential medicines and 9,448 non-essential medicines. This round marked the first proposed winning-bid list for 2015, and the changes in its procurement model and pricing have attracted widespread attention from the industry. In this round, drug procurement was conducted through a unified pricing approach, with drugs whose bidding documents passed review being directly listed on the online platform.

　　Price comparisons before and after drug bidding are a key focus of market attention. By analyzing the results of this round of competitive bidding, several “leading indicators” have emerged from the Hunan tender.

　　Tender for Traditional Chinese Medicine Injections Stalls

　　Highly controversial traditional Chinese medicine injection products were significantly affected in this tender. Among these injections, the major products Xueshuantong and Xuesaitong will only be tendered for aqueous injections, with no tenders for lyophilized powder for injection; meanwhile, several proprietary Chinese medicines have had multiple oral dosage forms eliminated, leading to a corresponding reduction in the number of competing manufacturers. Given that aqueous injections are relatively inexpensive, attract numerous manufacturers, and command lower tender prices, this situation is highly disadvantageous for companies whose products are exclusive or quasi-exclusive lyophilized powder for injection formulations.

　　In addition, Buchang Pharmaceutical’s Danhong Injection, Jiangxi Qingfeng Pharmaceutical’s Xiyanping Injection, and Lizhu Group’s Shenqi Fuzheng Injection have all withdrawn from the Hunan market, signaling a severe reshuffling of the traditional Chinese medicine injection sector in Hunan.

　　Separate pricing; premium-quality varieties receive no preferential treatment.

　　For instance, among insulin products, Eli Lilly’s biosynthetic human insulin from Suzhou ultimately secured a 8% price reduction and entered the Hunan market. Although Tonghua Dongbao maintained a relatively favorable pricing structure and won the bid without lowering its price, its flagship formulation—Ganshulin 30R (300 IU)—failed to secure a contract. Novo Nordisk, on the other hand, ultimately withdrew from the bidding process.

　　This tender did not grant any preferential treatment to separately priced items or to high-quality, premium-priced varieties, resulting in several manufacturers with relevant products being unsuccessful. With low bids winning the contract, can quality be guaranteed? The debate has reignited.

　　Original and first-generic products receive preferential treatment.

　　For example, the price of the first generic version of oxaliplatin has remained unchanged, still 33% higher than that of its competitors; meanwhile, the originator manufacturer of tegafur/gimeracil/oteracil has kept its price stable, while the price of the first generic has fallen only slightly, reflecting Hunan Province’s continued preferential treatment for first-generic products. (Mene.net)