3 billion, nearly 10 years, why GlaxoSmithKline again?

Recently, the State Food and Drug Administration issued a notice on the suspension of the import, sale and use of GlaxoSmithKline (GSK) Dutastamide soft capsules.

On the same day, China's State Organized Drug Procurement Office announced that GlaxoSmithKline was disqualified from the selection of Dutastamide capsules, and GlaxoSmithKline was added to the "violation list" :

The company was suspended from October 31, 2022 to April 29, 2024 to participate in the state-organized centralized drug procurement activities to declare eligibility.

It is almost a decade since GSK was fined a hefty Rmb3bn for bribery in 2013, which led to its near-withdrawal from the Chinese market.

Why GSK again?

Just take it off the shelves?

The GSK fined, because on the export of China's state food and drug administration organization found enterprise he male amine soft capsule is not registered in accordance with the standards for each shipment, inspection, and the shortcomings in the microbial contamination risk prevention and control, comprehensive evaluation conclusion for the variety of production quality management does not conform to our country "drug production quality management norms" (revised in 2010).

dutasteride is a prostatic hyperplasia treatment for moderate to severe symptoms of benign prostatic hyperplasia (BPH) with enlargement of the prostate, reducing the risk of acute urinary retention and surgery associated with BPH.

Dutamide, originally developed by GlaxoSmithKline, was launched in the United States in 2001 and approved to enter China in 2011. The patent expired in 2015. Data show that in 2021, the global sales volume of tamandroide is about 400 million US dollars, and the domestic sales volume is more than 3 million yuan.

In addition to GSK's original drug, three other domestic generics have been approved: Sichuan Guowei Pharmaceutical, Chengdu Shengdi, a subsidiary of Hengrui Pharmaceutical, and Qilu Pharmaceutical.

In the fifth batch, GSK's original drug and Chengdu Shengdi's generic drug won the bidding at 30.96 yuan and 33.1 yuan respectively, with GSK's winning price about 58% lower than the highest valid declared price.

Although GSK's Dutaandroide soft capsules have now been removed from all major platforms and their qualification for national selection has been cancelled, the impact on GSK will be limited as the purchase agreement expired at the end of October this year and the product's sales volume in China is not large.

For patients, the impact is also very small. The main clinically used drugs for benign prostatic hyperplasia in China are tamsuloxine, finasteride and terrazosin, etc. In the market of over 3 billion, dutastamide only accounts for a small part of the market, not to say that there are three generic drugs to choose from.

The bigger issue for GSK is the 18-month suspension.

With the normalization of national centralized procurement of drugs, centralized procurement will become the main means for medical institutions to purchase drugs. The 18-month suspension means GSK could miss three national opportunities and lose the market to generics.

In the upcoming eighth batch of national production, three of GSK's original products are eligible for collective production, namely amoxicillin potassium clavulanate tablets, Lamotrigine tablets and paroxetine hydrochloride enteric-soluble sustained-release tablets.

Among them, amoxicillin clavulanate potassium preparations in the domestic market scale of about 6 billion yuan, including more than 4 generic drugs including Huabei Pharmaceutical review; Lamotrigine tablets in the domestic market scale of about 300 million yuan, including Guilin Sanjin 3 generic drugs; The domestic market size of paroxidine hydrochloride enteric sustained release tablets is about 50 million yuan, and there are 3 generics including Xinlitai.

As more and more varieties of domestic generics have been reviewed, GSK's original research drugs will directly lose market share in the hospital.

More far-reaching, GSK's brand and reputation will suffer, the brand will lose trust in the market, and the company's business in China could suffer as a whole.

Why GSK again?

Back at GSK itself, recent years have been tumultuous.

GSK's performance has been largely flat for the past three years as sales of established drugs continue to slowly decline and new products have yet to grow into blockbusters.

In 2021, GSK achieved operating revenue of 34.114 billion pounds, an increase of 0.04%; Net profit attributable to the parent was ￡4.385 billion, down 23.73% year-on-year.

Vaccines, which used to be GSK's flagship business, declined 3 percent in 2021, when Pfizer, BioNtech and Moderna were making huge profits from COVID-19 vaccines.

Sales of the bivalent HPV vaccine and shingles vaccine in China, which had been expected to be high, fell short of expectations. GSK, which once topped the world's top 10 vaccine makers, has now slipped to number six.

At the same time, the policy direction of the global pharmaceutical industry has quietly changed.

In May 2021, the UK's antitrust Authority announced that GlaxoSmithKline, Merck and Jalai, three multinational pharmaceutical companies, violated competition law and fined the three companies respectively, among which GSK was fined 22.2 million pounds (about 201 million yuan).

Against this backdrop, GSK has been shrinking its operations and cutting staff.

In February, GSK announced it would cut 650 jobs in the US; In April, GSK decided to accelerate the worldwide withdrawal of adefovir dipivoxil, its once-blockbuster hepatitis B drug, from the Chinese market.

GSK's consumer health business was spun off in July as it completed its biggest restructuring in two decades to focus on developing innovative vaccines and drugs. Consumer health will account for about 30 per cent of revenues by 2021, meaning the new GSK will be about two-thirds the size.

There are also frequent changes at the top.

In September, current CFO Iain Mackay decided to retire and was replaced by former Burberry CFO and operating officer Julie Brown; In October, several foreign media reported that Roger Connor, president of Vaccines and Global Health, was stepping down.

GSK, which used to rely on vaccines and a wealth of original products, is losing its edge and shrinking its business and staff. GSK, which has been ranked among the top 10 pharmaceutical companies in the world for a long time, may drop out of the list.

Violation of the quality of the red line, foreign companies still heavy fines

According to the National Medical Insurance Administration, seven batches of selected drugs and three batches of consumables have been purchased at an average price of over 50% and 80% respectively, saving about 300 billion yuan in total costs.

For patients, reducing medical costs would be a boon. But people also worry about whether the quality of the products can be guaranteed after the "low price".

In fact, since the centralized procurement of drugs, the bidding enterprises have been punished for supply failure or quality problems.

As early as June 2019, Squibb's 4+7 selected Fosinopril sodium tablets were out of supply in Hebei Province due to insufficient supply. But the health insurance credit rating system was not in place at the time, so Squibb got away with it.

However, Huabei Pharmaceutical has not been so lucky. In August last year, Huabei Pharmaceutical received the first "fine for failing to supply" the third batch of ibuprofen sustained-release capsules, which was included in the "violation list", and was disqualified to apply for national purchase before May 10, 2022.

Since then, in the national and local collectibles, many pharmaceutical enterprises have been cut off due to the epidemic, the price rise of raw materials, and the shortage of production capacity. Sandoz, a subsidiary of global giant Novartis, has cut its supply of losartan potassium tablets.

Compared with collective mining and supply cut-off, the quality problem is obviously a more untouchable red line.

According to the official website of the State Food and Drug Administration, the State Food and Drug Administration has held many meetings to promote the quality supervision of selected drugs to strengthen supervision and management and risk prevention and control.

But even so, there are still drug companies exposed to quality and safety risks, and most of the foreign companies.

In March 2020, the import, sale and use of paclitaxel for injection (albumin-binding type) of the second batch of selected key production facilities from the United States Xinji Company did not meet the basic requirements of China's drug production quality management, and was suspended.

In January 2022, the second batch of national selected products, glimepireide tablets produced by Shengzi Tang Pharmaceutical, did not meet the quality management standards of drug production and were included in the "violation list", and were suspended from participating in the national collection for 18 months.

In June 2022, part of the fifth batch of national selected products, bicalutamide tablets produced by Sun India, failed to meet the registration standards of imported drugs in the "dry and weightless" project. The products were suspended from sale, discontinued and recalled, and the selection qualification of Bicalutamide tablets produced by Sun India was cancelled.

As can be seen from the above series of penalties, the quality supervision of collectible varieties is becoming more and more strict, no matter domestic or foreign investment, are treated equally, and there is no tolerance for quality problems.