Chinese drugmakers' earnings weaken on pricing pressure: Fitch

Source: Xinhua| 2019-09-21 12:37:58|Editor: Xiang Bo
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BEIJING, Sept. 21 (Xinhua) -- Chinese drug manufacturers' earnings are likely to remain under pressure due to price curbing measures, with increasing divergence in performance between common generic and innovative drugmakers, according to the latest Fitch Ratings report provided to Xinhua.

Chinese drug manufacturers reported slower revenue and profit growth in the first half of 2019 as a result of the government's control on medical insurance costs and falling drug prices, the ratings agency noted.

The 220 A-share listed drug manufacturers reported slower aggregate revenue and operating profit growth of 11.9 percent and 1.7 percent in H1, respectively, down from 23.4 percent and 22.8 percent in the same period last year.

"The government's volume-based drug procurement scheme, which only awards tenders to drugmakers that are willing to lower prices and are capable of large-scale production, has exaggerated pricing pressure for chemical drug producers," said the report.

The scheme was piloted in 11 cities for 31 frequently used generic drugs last December, which sparked aggressive price cuts and dampened the sales and profitability of drugmakers that failed in tenders, Fitch said.

Fitch expected the extension of the scheme to trigger nationwide drug price cuts, which would put further pressure on generic drug makers' performance.

The revised drug-tender rule that allowed multiple winners for a single drug instead of one will somewhat alleviate the risk of losing significant market share for some drugmakers, it said.

In contrast, innovative drugmakers, which are exempt from most drug-price cutting policies, will continue their earning advance and benefit from favorable policies on new drugs, according to the report.