China says new drugs policy stirs competition, M&As

BEIJING, Aug 20 - China's Health Ministry said on Thursday that a new essential drugs policy will create competition among manufacturers and lead to more mergers and acquisitions in the fragmented industry.

Earlier this week the ministry issued a list of 307 essential drugs as part of its plan to provide basic and affordable healthcare, the first step in sweeping reforms that aim to cover 90 percent of the population with basic medical insurance by 2011.

"It is a brand new system, and is the most crucial and difficult part of the medical reform,"Zheng Hong, the head of medical policy and the essential drugs programme at the Ministry of Health, told journalists.

"Essential drugs will be purchased through competitive bidding," said Zheng. "It's impossible for all makers of the same drug to win bids ... so the impact will be more mergers and acquisitions."

The initial list of drugs will benefit mostly domestic companies that manufacture basic generic drugs.

Since Tuesday, Tianjin Zhongxin Pharmaceutical Group is up about 20 percent and Mayinglong Pharmaceutical Group has gained 9.3 percent, while the broader Shanghai index has risen only 0.6 percent.

For the complete list of drugs please go to: http://www.moh.gov.cn/publicfiles/business/htmlfiles/mohywzc/s3580/200908/42506.htm ($=6.83 yuan)