China will cut the maximum retail prices of 95 cancer, immunology and blood-related drugs by about 17 percent to try to reduce the growing number of chronic, ageing-related diseases in the country and make healthcare more affordable.
Healthcare is viewed as a flashpoint of social unrest in China and the central government has been trying for the past decade to revamp the lumbering public healthcare system to make it more accessible.
In the country of over 1.3 billion people, 260 million are diagnosed with some form of chronic, long-term illnesses, which now account for 85 percent of China's death figures.
China's National Development and Reform Commission (NDRC) said in a statement posted on its website the reductions would begin on October 8.
The reductions are expected to eat into margins of drug manufacturers and distributors, but companies with diversified drug portfolios will be less affected, said Jason Mann, head Barclay's research unit on China healthcare and pharmaceuticals.
"The NDRC has reduced the maximum retail prices, but in many cases these drugs will sell for less than the maximum price due to market forces, so it sounds a bit more scary for the manufacturer than it really is," Mann said.
However, companies that may be impacted are oncology-focused Jiangsu Hengrui Medicine Co Ltd, and U.S.-listed 3SBio Inc which makes drugs for cancer, inflammation, kidney and infectious diseases, Mann added.
"Because most Chinese drug companies are fairly diversified, they will have some exposure, but it will be limited," he said.