Many pharmaceutical companies in China are cutting their workforce as the effect of the government’s drug hoarding program kicks in.

Since 2018, China has rolled out multiple rounds of centralized procurement of drugs and high-value medical supplies. In February this year, Premier Li Keqiang boasted that as a result, the country had slashed medical insurance costs and patient expenditures to a significant degree.

However, Zhang Wan, an industry employee in China’s Tianjin metropolis, told media outlet Da Ji Yuan that the effort also deprived pharmaceutical companies of the profit needed for usual operations. 

Zhang said that there is a common belief that companies are selling drugs at lower prices to the government, which affects their profit margin. Sequentially, firms have to resize their workforce and reduce employee salaries.

On May 24, Finance Sina reported that in 2021 a total of 39,650 people had been laid off by 116 of the 442 pharmaceutical businesses that were publicly traded. That amounted to 26.2% of the total listed pharmaceutical companies, and most of them were leading enterprises.

The news agency noted that highly successful Yiling Pharmaceutical had to downsize significantly, giving up on 1,757 employees last year. This occurred even as Yiling’s sales of its respiratory system products totaled $613 million in 2021. 

China National Pharmaceutical Group Corporation, the company that develops China’s Sinopharm COVID-19 vaccines, let go of 1,009 employees in 2021.

But the situation has not stopped this year. China Net Medical Channel reported that Winhealth Pharma announced layoffs in the cardiovascular drug product line in April. Workers had to leave immediately after receiving their compensation, and regional managers were threatened with demotion if they refused the order.

Media outlet Da Ji Yuan reported that big names in the sector, such as Fosun Pharma and Green Valley Pharma, have also significantly reduced their workers. However, the scale of the layoff is unknown. 

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