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Volume-based procurement (VoBP) has been gathering momentum in China, both at national and regional levels. Major pharmaceutical players stand to see large impacts on their branded generics portfolio, and need to move fast to improve organizational and system readiness.
Volume-based procurement (VoBP) is a series of drug procurement policies carried out in China, aimed at encouraging generic substitutions and bringing down the cost of drugs that have passed their exclusivities.The rollout of volume-based procurement in China began in 2018, featuring stiff competition and steep price cuts for mature drugs. More recently, VoBP has unfolded at both national and regional levels, with broadening scope, faster pace, and greater price pressure.
At the national level, the results for the 5th round national VoBP were released on June 23 2021, and with 61 drugs included, were broader in scope than previous rounds. The magnitude of the cut also broke records with an average of 56 percent. Of the 251 products that won the tenders, most came from local companies, with just 11 from MNCs. However, unlike previous rounds, injectables became the main focus, accounting for almost half of the drugs included.
In parallel, the pace of regional VoBPs has accelerated. Rolled out in the second half of 2019, over 40 regional VoBPs have been carried out so far, covering all provinces across China. More recently, cross-province alliance VoBPs have emerged to improve bargaining power.
Complementary to national VoBPs, regional VoBPs mainly focus on drugs that are not covered by national VoBPs, including non-GQCE products, injectables, and biologics, and pose a different set of challenges to major pharmaceutical players:
Our experts at Simon-Kucher have identified three key areas for pharma players to improve their VoBP readiness:
On the one hand, this is key to keep the global team up to date with the latest China market dynamics and challenges in real time, and align on outlook and expectations. On the other, the China team will benefit from global support, experiences, and resources, which would go a long way in improving the organizational and system readiness for future VoBPs.
About the authors
Bruce Liu leads Simon Kucher’s Life Sciences division in Greater China. He is recognized as a thought leader on key industry topics, with recent publications on medtech access trends, reimbursement listing outlooks, business model innovations, and globalization strategy.
Also at Simon-Kucher, Tong Wang is a Senior Consultant in the Life Sciences division and is based in the Shanghai office; Josh Lee is a Senior Consultant, with experience in a breadth of projects working with both pharmaceutical and medtech companies in US, EU and China markets; and Lillian Li is a Senior Consultant whose areas of specialty include pricing strategies, market access opportunities, as well as post-launch competitive positioning in China.