The State Council of China released the Notice on Issuing the Opinions on Pushing Forward the Pharmaceutical Pricing Reform in 2015 to cancel the original prices of pharmaceutical products other than narcotic drugs and category-I psychotropic drugs set by the Chinese government, improve the pharmaceutical product procurement mechanism, give play to the medical insurance expense control, and form the actual transaction prices of pharmaceutical products mainly by market competition. According to the notice, except narcotic drugs and category-I psychotropic drugs are still to be temporarily implemented the maximum ex-factory price and maximum retail price management by the National Development and Reform Commission of China, the prices of other pharmaceutical products set by the government will be cancelled and no longer implemented the maximum retail price management, and the prices are to be formed by the market through different ways and according to the classification management principles. In a few words, except special pharmaceutical products including narcotic drugs and psychotropic drugs, etc., prices of other common pharmaceutical products should be decided independently by the market supply and demand situations, i.e., market-oriented pricing.
The original idea of the market-oriented pricing is to have pharmaceutical factories realize free competition, and benefit the medical insurance, thus to reduce the support in the medical insurance expenses. Based on this policy, some pharmaceutical products that are in short supply or are cheap could be preserved by increasing prices, not to be out of supply due to low prices. However, Liaoning Pharmaceutical Products and Medical Consumables Centralized Procurement Website (www.lnypcg.com.cn) has continued to release early warning notices in recent years, involving nearly 100 pharmaceutical products that cannot be supplied or distributed normally, for which the main reason is one: the soaring of API prices. Enterprises have to suspend production because they cannot make ends meet. And this situation is getting worse recently.
The main reason behind is that several APIs are monopolized by distributors, which is exactly the same trick as the expensive ginger and beans several years ago. Relevant report can be seen in the hot article "Who did it? Skyrocketing for 58 Times in a Month! Chlorpheniramine Soaring from RMB 400 to RMB 23,300" recently.
Then, why the price rise of APIs surfaces at this time? In fact, essentially, it is relevant to the excessive quantity of money on the market recently. In a pond (market) with a fixed size, the level line will naturally rise when the water (money) increases. General prices are subject to the strict regulation of the price bureaus and basically don’t rise. All the previous expensive garlic, beans, ginger, sugar, and apples with rising prices were not the basic demands such as rice, but were demands a little higher than basic demands; and they were subject to strict regulation and are all gone after the media paid attention. However, as there has been more water (money) on the market recently, there needs to be an outlet; previously, real estate served as the reservoir, then the common ginger, garlic and sugar, etc., and now the APIs that are not in popular demand. When one thing is pressed down, another thing floats up, and this time what floats up is APIs, a commodity targeted by the extra hot money that you can’t imagine. Pharmaceutical products are a special commodity in essence, which is a saying from the textbook.
Specifically speaking, this price rise of APIs is simple and crude without any skill, but the buyers—pharmaceutical factories have to choke with silent fury. Monopoly brings windfall profits, which is true, but monopoly needs costs, which are the extra "water" on the market. APIs are essential raw materials in pharmaceutical production, and are purchased with target quantity, but in terms of the cost structure, they don’t account for a large proportion in the final total drug prices; most pharmaceutical factories have to buy even if the prices ri...
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