People's Daily: Centralized Drug Procurement – New Rules Bring New Changes
Many experts who observed and guided this centralized procurement stated that the procurement rules will continue to be refined in the future. However, the effort to avoid cut-throat competition in the generic drug sector should not be limited to the downstream procurement link. Relevant departments have the responsibility to guide enterprises in scientific project initiation, prevent the concentrated and clustered production of the same drug which exacerbates homogeneous competition, and guard against cut-throat competition from the source. Otherwise, it is unscientific and unrealistic to pin the industry's goal of avoiding cut-throat competition entirely on the new centralized procurement rules.
The official results of the 11th round of national centralized drug procurement are to be announced soon. Rule adjustments have become a highlight of this procurement drive. The new rules focus on "stabilizing clinical practice, ensuring quality, avoiding cut-throat competition, and preventing bid rigging". Medical institutions can report procurement volumes by brand, an anchor price and a revival mechanism have been set up to guide healthy market competition and create a sound environment for the high-quality development of the pharmaceutical industry.
On October 31, the proposed winning results of the 11th round of national centralized drug procurement, which attracted wide public attention, concluded their public notice period. The official results are to be released imminently, and patients are expected to have access to a new batch of high-quality and affordable winning drugs in February 2026.
At the Centralized Drug Procurement Application Information Disclosure Conference held in Shanghai on October 27, 453 products of 55 drug categories from 272 enterprises obtained the proposed winning qualification. This means that the number of drug categories included in national centralized drug procurement has increased to 490 since the establishment of the National Healthcare Security Administration (NHSA).
Before the bid opening of this procurement drive, the news of "comprehensive optimization of rules" had raised expectations in the industry. A series of principles including "stabilizing clinical practice, ensuring quality, avoiding cut-throat competition, and preventing bid rigging" have led to a host of adjustments in aspects such as volume reporting by medical institutions, bidding thresholds for enterprises, and competitive bidding for admission. Have these principles and the corresponding new rules worked and achieved the expected results? The reporter interviewed relevant personnel on the spot at the conference.
Over 70% of Brand-based Volume Reporting Successful; Major Enterprises with Strong Supply Capacity and Guaranteed Quality Mostly Win Bids
The drugs covered in this procurement drive include commonly used and life-saving drugs for chronic and serious diseases, involving anti-infective, anti-tumor, anti-allergic asthma, diabetes, and cardiovascular drugs, among others. In previous centralized procurement, after winning drugs were put into use in hospitals, it might happen that the drug brands prioritized by hospitals were different from those originally used by patients. Although this reduced the financial burden on patients, it also brought some troubles.
This procurement drive has optimized the volume reporting method, allowing medical institutions to report volumes either by generic name or specifically by brand. According to statistics before the bid opening, 77% of the procurement volumes from 46,000 medical institutions were reported by brand. This helps more medical institutions and patients to access cheaper drugs without changing the brand.
From the perspective of the winning results, 75% of the procurement volumes requested by medical institutions have been met. Major enterprises with strong supply capacity and guaranteed quality have mostly won the bids, with multiple winning enterprises supplying drugs in each region, making the winning categories more abundant and diverse.
Drug quality has attracted equal attention as price. The new rules of this procurement drive pay more attention to enterprises' quality control capabilities and raise the quality threshold for enterprise bidding. They put forward requirements for enterprises' actual production experience, and clearly stipulate that the bid drugs must not have failed random inspections in the past two years, and the production lines where they are manufactured must not have violated the Good Manufacturing Practice for Drugs (GMP) in the past two years.
"Individual enterprises failed to obtain participation qualifications because they did not meet the above conditions, which shows that the rules raising the quality threshold have truly played a role," a relevant person in charge of the NHSA said. In addition, drug regulatory authorities will include winning drugs in the scope of key supervision and inspection, achieve full coverage of inspections on winning enterprises and random sampling of winning products, and make every effort to ensure the quality and safety of centrally procured drugs.
Anti-Cut-Throat Competition Rules Play a Certain Role; Enterprises Rationally Reject Bids Below Cost
October 27 was a long day for many manufacturer representatives participating in the centralized procurement.
"My colleagues queued up as early as 6 a.m. and luckily got a relatively front position. We have already submitted the materials," the sales person in charge of the East China region of a Zhejiang pharmaceutical enterprise told the reporter outside the venue early on the morning of October 27. "We bid for 3 categories, and I heard that the results will not be released until the evening even if everything goes smoothly. We hope it will end early."
According to statistics from the National Joint Procurement Office of Pharmaceuticals, the intensity of competition is much higher than previous rounds due to the large number of enterprises participating in this procurement drive.
The procurement drive no longer simply takes the lowest bid as the sole reference for price difference control. An anchor price (the higher value between the "lowest bid" and "50% of the average qualified bid" is taken as the anchor) is set to prevent the impact of extremely low prices, and two types of revival mechanisms – "revival for qualified bidders" and "revival for unqualified bidders" – are introduced to guide healthy market competition. In addition, all bidding enterprises must commit to quoting prices no lower than the cost. Enterprises whose bids are lower than the anchor price are required to issue a statement on the rationality of their bids and explain the specific cost composition (such as manufacturing costs, period expenses, sales profits, etc.) to address public concerns about the quality of drugs winning bids at low prices. Objectively speaking, the new anti-cut-throat competition rules of this procurement drive have been considered quite comprehensively.
The reporter learned during the bid opening on October 27 that the lowest winning bid for many drug categories was indeed lower than 50% of the average bid. Since this procurement drive no longer uses such bids as the anchor price to link and restrict the winning prices of other enterprises, drugs with bids a certain margin higher than the lowest bid are guaranteed the opportunity to win or be "revived", and the original intention of "avoiding cut-throat competition" has been realized to a certain extent. At the same time, measures such as repeated publicity and guidance for enterprises to make scientific bids in the early stage have also played a role. This procurement drive has maintained a relatively high winning rate, and the average price difference of winning products has narrowed significantly compared with previous batches, indicating that the consistency of expectations or costs among different enterprises is increasing.
Moreover, the new rules have made enterprises more rational. Faced with revival opportunities, some enterprises rationally choose to give up, considering that the procurement volumes reported by medical institutions are too small to amortize costs even if they are revived with large-scale procurement volumes.
Guiding Scientific Project Initiation; Guarding Against Cut-Throat Competition Must Start from the Source
At the on-site signing for the "revival" of unqualified bidders accepting the highest winning bid price, a representative of a powerful enterprise in the pharmaceutical industry told the reporter that although their enterprise can accept the winning price, the profits of many winning categories in this procurement drive are extremely meager.
The goals of centralized drug procurement are, on the one hand, to reduce the medication costs of insured persons, improve the efficiency of medical insurance fund utilization, pay more for the value of drugs, and reduce the consumption by drug marketing premiums; on the other hand, to promote the transformation of the business model of the generic drug industry, increase market concentration, force enterprises that originally thrived on generic drug production to break away from the path dependence of "marketing-oriented development", and focus more on cultivating core competitiveness such as quality and innovation. However, against the backdrop of excessive cut-throat competition in the generic drug sector, the public inevitably worries about quality problems of centrally procured drugs caused by excessively low profits; the industry is also anxious that the problem of low corporate profit margins will spread to the innovative drug sector. These situations have put great pressure on the centralized procurement system.
In accordance with the selection criteria of this procurement drive, "the number of enterprises producing reference listed drugs and generic drugs that have passed the consistency evaluation shall reach 7 or more". In fact, there are an average of 14 enterprises per drug category, among which 3 categories have more than 30 competing enterprises. Diprophylline for Injection, the most fiercely contested category, has 48 bidding enterprises... On-site experts commented that such competition, on the one hand, reflects the sufficient production and supply capacity of China's pharmaceutical industry, which is conducive to forming a fully competitive market environment; on the other hand, it is difficult to avoid extremely low bids for individual categories when dozens of enterprises compete for a single drug.
Notably, Diprophylline for Injection failed to be included in centralized procurement last year because it did not meet the condition of having more than 7 enterprises that passed the consistency evaluation. A year later, the number of certified enterprises suddenly increased by more than 40, making this category the "most competitive one".
"There are not only many enterprises that hold certificates for production themselves, but also some that do not produce drugs by themselves but entrust other enterprises to manufacture them. In addition, some enterprises obtain certificates through entrusted R&D and then entrust production after getting the certificates, which undermines the original industrial ecology," a representative of a Chongqing enterprise participating in the centralized procurement said. Such views were mentioned many times in the reporter's interviews.
"It takes several years and millions of yuan in costs from project initiation to certificate acquisition. If we do not participate in centralized procurement after getting the certificate, the investment will become a sunk cost," a representative of a manufacturer newly entering the competitive track of generic drug centralized procurement said. "Did you understand the competitive landscape at the time of project initiation? There are so many generic drugs that no one has set foot in, why not choose them?" Faced with the reporter's question, the representative did not answer.
Many experts who observed and guided this centralized procurement stated that the procurement rules will continue to be refined in the future. However, the effort to avoid cut-throat competition in the generic drug sector should not be limited to the downstream procurement link. Relevant departments have the responsibility to guide enterprises in scientific project initiation, prevent the concentrated and clustered production of the same drug which exacerbates homogeneous competition, and guard against cut-throat competition from the source. Otherwise, it is unscientific and unrealistic to pin the industry's goal of avoiding cut-throat competition entirely on the new centralized procurement rules.