Pfizer Tries to Outrun China Drug Policy With Rural Sales Push

03 June 2019

Bloomberg News

Pfizer Inc. is pushing into rural China as a generic-drug purchasing program for major cities has hurt sales of the company’s aging blockbuster treatments for heart disease.

The New York-based drugmaker is trying to outrun the price-cutting initiative, hiring 600 additional people this year to drive growth outside the 11 Chinese cities that are involved, Michael Goettler, who heads Pfizer’s Upjohn division that sells older drugs, said in an interview.

The program forces companies to bid for contracts to sell generic copies of branded drugs that have lost patent protection, pushing down prices by as much as 90%. While China stands to save tens of billions of dollars on medications, big pharma companies are getting hurt. AstraZeneca said earlier this year that China sales growth will slow because of the plan, and French Sanofi cited it as a reason for not boosting its annual earnings forecast.

Global drugmakers are rapidly expanding their presence in China in search of growth beyond the major U.S. and European markets. Quick approvals for new drugs at the revamped Chinese regulator has unlocked revenue potential for the western drug giants, but the concurrent clampdown on generic prices is hurting their bottom lines and complicating the outlook. While the program is starting out in major cities, China plans to expand it nationwide.

Pfizer lost out to Chinese manufacturers for contracts to supply the participating cities with generic versions of Lipitor, the cholesterol medication that was once the world’s top-selling drug, and Norvasc, a treatment for high blood pressure. As a result, public hospitals in the 11 cities will switch from Pfizer’s products to locally produced alternatives. Pfizer dropped Lipitor’s price by 30% in response, Goettler said.

About a fifth of Upjohn’s $12.5 billion in revenue last year was from China, and sales grew at over 20%, the division’s biggest global increase. Goettler wouldn’t comment on whether that pace will slow under China’s new policy.

Pfizer just shifted Upjohn’s global headquarters to Shanghai, a decision made before the new pricing policy was announced. Goettler said he’s still optimistic about growth, calling the new program “short-term turbulence.” As many as 200 million patients in China aren’t getting needed treatment for high blood pressure, he said.

“The need is still there,” he said in the interview, “the growth opportunity and volume is still there, and we want to be part of the growth.”

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