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China's Drug-Price Cuts Are Hitting Big Pharma Where It Hurts

  • Hospitals and provinces pressure drug companies on prices
  • Growth in China's $115 billion drug market has stalled
Shoppers wait in line to enter the Lung Shing Dispensary, also known as the Dragon City Pharmacy, in the Tsim Sha Tsui district of Hong Kong, China, on Tuesday, Oct. 6, 2015.
Photographer: Xaume Olleros/Bloomberg

The world’s largest pharmaceutical companies are facing a roadblock in China as a state-led campaign to slash drug prices has triggered a slowdown in sales growth.

One of the biggest problems: China’s government-run health insurance funds, which are struggling to keep up with an ageing population and surging incidence of diseases like cancer or diabetes. As they grapple with tighter budgets and a slowing economy, many of these funds are capping reimbursements to patients and pushing local authorities to negotiate with companies to lower drug prices.