Kangmei, China Drugmakers' Shares Tumble on Report of Further Price Cuts

Kangmei Pharmaceutical Co. paced declines by Chinese drugmakers after the Economic Observer reported the government may cut medicine prices by 40 percent.

A gauge of health-care stocks tumbled 3.4 percent, the most among the 10 industry groups on the CSI 300 Index, at 1:27 p.m. in Shanghai. Kangmei Pharmaceutical lost 4.9 percent to 21.10 yuan. Beijing Tiantan Biological Products Corp. retreated 3.3 percent to 23.09 yuan while North China Pharmaceutical Co. dropped 3.7 percent to 16.27 yuan.

The National Development and Reform Commission may lower prices by an average 40 percent for 658 approved medications, the Economic Observer reported today, citing officials from unidentified pharmaceuticals companies. The NDRC didn’t immediately respond to a fax seeking comment.

“Lowering the drug prices has been and will continue to be a trend,” said Li Ying, a health-care analyst at Capital Securities Corp. in Shanghai. “As the government wants to make medical care affordable to everyone, more price cuts are underway.”

The latest reduction in prices will be the fourth for nationally approved drugs since 2009, the newspaper said. Some prices of Chinese traditional medicine and vitamins will be subject to cuts of as much as 70 percent, it said, citing a government plan that hasn’t been made public. Injections of vitamin B6 will fall to 0.17 yuan ($0.03) from 0.39 yuan, the newspaper said.

The proposal comes after Anhui Province initiated cuts averaging 50 percent on 852 separate drug items in September, the report said. NDRC officials praised the move and used it to shape a national plan, it said.

Company Appeals

Drug companies are appealing to the State Council and the NDRC because the cost of some medications would be higher than their price, it said. The production cost of Agastachis Herbal Liquid is 3.7 yuan at Zhejiang Conba Pharmaceutical Co., while Shu Zhong Pharmaceutical Group won a government contract in Anhui with a price of 1 yuan, the report said.

China last month cut prices of drugs made by foreign companies including Roche Holdings AG and Bristol-Myers Squibb Co. as part of government efforts to rein in health-care costs.

--Yidi Zhao, Irene Shen. Editors: Richard Frost, Margo Towie

To contact the Bloomberg News staff on this story Yidi Zhao in Beijing at yzhao7@bloomberg.net; Irene Shen in Shanghai at ishen4@bloomberg.net

To contact the editor responsible for this story: Bill Austin at billaustin@bloomberg.net; Darren Boey at dboey@bloomberg.net

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