TMTPOST -- Transnational pharmaceutical giants such as Pfizer, Bayer, and Merck have failed to secure any contract for their original branded drugs at the 10th round of centralized drug procurement in China on Friday. Several multinational companies chose not to participate at all, indicating a shift in the market where foreign-developed drugs increasingly struggle to compete on price with generics made in China.
Non-Chinese drugs, burdened by hefty research and development costs, find it difficult to offer competitive pricing. In some cases, their bids were more than ten times higher than Chinese alternatives. For instance, Merck’s posaconazole injection was priced at 1,420 yuan (US$ 195) per vial, while its enteric-coated tablets were quoted at 2,880 yuan for 24 tablets. Similarly, a Switzerland pharmaceuticals and biotechnology company Actelion’s macitentan tablets were listed at 4,036.5 yuan for 30 tablets—50 times more than the winning bid for similar drugs. Meanwhile, UCB’s lacosamide injection came in at 333 yuan, compared to Shanghai Pharma’s bid of 20.88 yuan, marking a nearly 15-fold difference.
In stark contrast, Chinese generic manufacturers have engaged in intense cost competition, driving prices down to levels that are nearly unthinkable. For example, aspirin was priced as low as 0.034 yuan per tablet, bringing the cost of a one-month supply to just 1 yuan, and a full year’s supply to 12 yuan. By comparison, a bottle of mineral water costs 2 yuan. Other price reductions included sodium lactate Ringer’s injection at 1.63 yuan for 500 ml, folic acid at 0.03 yuan per tablet, and tetramethylbutane injection at 0.89 yuan per vial, down from 165 yuan before the procurement round.
The 10th procurement round boasts the largest scale to date, with a broader range of drugs and more participants than in previous rounds, significantly increasing price competition. Many drugs saw price reductions of over 90%, with some plummeting by more than 96%. While these deep cuts benefit consumers, they raise concerns over the long-term sustainability of drug manufacturers. With profit margins squeezed to near zero, many companies, especially Chinese generics, could face financial strain or bankruptcy.
The collapse in prices also stifles innovation and international expansion—vital strategies for domestic firms hoping to survive in an increasingly competitive landscape. As global companies retreat from China’s centralized procurement system, Chinese manufacturers are left with the challenge of navigating a brutal market. Their options are limited: innovate or seek growth abroad. However, as profits diminish, both paths appear increasingly difficult.
Foreign direct investment (FDI) in the Chinese mainland in actual use shrank by 27.9% in the first 11 months from the same period of 2024 to 749.7 billion yuan (about US$104 billion), the Ministry of Commerce said Saturday.
This decline in the first 11 months narrowed by 1.9 percentage points compared to the first 10 months. Investment from some developed economies has continued to grow, with actual investment from Germany up 10.9% year on year, from Singapore up 4.8%, and from Switzerland up 4%. Investment from ASEAN countries climbed 6.4 percent year on year.
According to reports released in September by the EU Chamber of Commerce (EUCC) in China and the American Chamber of Commerce in Shanghai, China is gradually losing its appeal as a prime investment destination for Western companies.
Both organizations conducted surveys of investors and business owners in China, showing that many are scaling back their operations in the country and no longer consider it a primary market for investment.
A significant number of respondents cited the ongoing trade tensions with the US as a key factor undermining investor confidence. Since 2018, when former President Donald Trump initiated a trade war with China, Washington has implemented a series of economic restrictions and raised tariffs on Chinese goods. While incumbent President Joe Biden has maintained a similar approach, Beijing has repeatedly argued that these actions violate the principles of fair trade. In the survey conducted by the American Chamber of Commerce, around 70% of respondents identified US measures targeting China as the greatest obstacle to the country's economic growth.
For a growing number of companies, a tipping point has been reached, with investors now scrutinizing their China operations more closely as the challenges of doing business are beginning to outweigh the returns, said Jens Eskelund, president of the EUCC.
However, Eskelund acknowledged that China “still holds significant potential” as an investment destination, but emphasized that the government must take steps to improve the business environment for foreign companies.
The American Chamber of Commerce’s annual poll showed that the percentage of businesses considering China as their top investment destination had fallen to 47%, the lowest level in 25 years. Meanwhile, a survey by the EUCC revealed that only 15% of respondents viewed China as their leading investment market, down from 20% in previous years.
The EUCC report highlighted that some of its members are starting to diversify their supply chains and operations away from China, redirecting investments to other markets to bolster supply chain resilience, reduce labor costs, and mitigate the risk of future geopolitical disruptions.
(1 yuan equals US$ 0.14)
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