(Yicai Global) Dec. 7 -- Chinese pharmaceutical equities have tumbled after the government released the results of its generic drug procurement tenders in 11 major cities this week, sparking concern over potentially lower profits.

The bulk-buying discounts were bigger than expected, driving frenzied selling by domestic investors, a source in private equity in Shenzhen told Yicai Global.

The price of hepatitis B medicine Entecavir fell 90 percent, while Irbesartan, which treats hypertension, plunged 60 percent, setting off a chain reaction in the market. Lepu Medical Technology [SHE:300003] dropped by the daily trading limit of 10 percent. Jiangsu Hengrui Medicine [SHA:600276] closed 6.82 percent down in trading today .

The cities of Beijing, Shanghai, Chongqing, Tianjin, Shenyang, Dalian, Xiamen, Guangzhou, Shenzhen, Chengdu and Xi'an buy 31 medications via the bulk-buying program, which confers the direct benefit on patients of lower costs.

Under the program, the government makes large purchases of specific quantities of drugs, awarding contracts to the lowest bidder. The scheme aims to reduce costs through economies of scale, according to state media People's Daily.

But many follow-up issues await resolution, Shi Lichen, founder and general manager of Beijing-based Dingchen Pharmaceutical Management Consulting Center, told Yicai Global. These include decisions on order sizes, payment terms, whether doctors will choose to tout a drug, ensuing hospital defaults and other administrative problems.

Editor: Ben Armour