Price Negotiations Net Listing of 36 New Therapies

 

The February 2017 update to China’s National Reimbursement Drug List (NRDL) was long awaited by both industry and patients alike. This update saw the list of western-style medicines grow by more than 10 percent to a total of 1,297 different formulations, whereas traditional Chinese medicines (TCM) accounted for 1,238 formulations. While many of the more prominent newer therapies were added to the list during this initial update, several other notable blockbuster drugs were excluded. These drugs were largely considered to have high clinical value but could not be added directly to the NRDL due to their costs. The Chinese Ministry of Health noted, at the time, that negotiations were already underway to have these drugs listed in the near future.

These negotiations came to fruition in July 2017, when the Chinese government announced that 36 additional drugs were added to the NRDL. The prices of these drugs were cut by an average of 44 percent in exchange for reimbursement listing. Of the 36 newly listed drugs, 31 are Western drugs and include notable blockbuster therapies such as Roche’s Herceptin (INN: trastuzumab, used to treat breast cancer), Rituxan (INN: rituximab, used to treat autoimmune diseases), and Traceva (INN: erlotinib, used to treat non-small cell lung cancer.)

Since the newly listed drugs were added to List B of the NRDL rather than the fully covered List A, reimbursement will be partial and drug specific. In other words, the reimbursement rate will range between 10 and 90 percent and vary for each drug and province. A full list of the newly added drugs and their reimbursement details can be accessed from the Ministry of Human Resources and Social Security (MOHRSS) website (link). In general, inclusion on the NRDL will help reduce the financial burden on patients and increase access to these innovative therapies. Prior to listing on the NRDL, these drugs were mostly financed by out of pocket payments from the small number of patients who could afford them.

Although the discounted prices translate into reduced profit margins, the pharmaceutical industry should expect increased uptake of the reimbursed products. That is, the increase in the sales volume of these products is likely to offset the reduction in prices. In addition to boosting sales volume, NRDL listing benefits the pharmaceutical industry by indirectly fighting against drug counterfeiting. In the absence of reimbursement coverage, many patients resort to buying counterfeit products due to their cheaper price tag. Therefore, NRDL listing will help diminish the market for counterfeit products as affordability of these drugs is improved after public-sector subsidization.

Considering the sheer size of the Chinese population, a significant growth opportunity exists for pharmaceutical manufacturers who can expand sales through NRDL listing. Unfortunately, the process of drug selection for listing on the NRDL is largely an internal affair that is driven by physicians and other scientific experts on advisory government committees (e.g. pharmaceutical and clinical opinion leaders and experts). In other words, pharmaceutical manufacturers have no direct way to apply for reimbursement in China. Therefore, life science companies should focus on educating these opinion leaders on the clinical benefit of their products so that they are more likely to be considered during the selection process.

The pharmaceutical industry should also take note of the importance of the aforementioned price discounts to the reimbursement process. With the Chinese government seeking to increase access to drugs while limiting growth of public healthcare expenditures, manufacturer-led negotiations and discounts could be the driving force behind considerations for future NRDL listing. Pharmaceutical companies failing to secure NRDL listing have the option of negotiating with the provinces individually. Such a process, however, is likely to be time-consuming, resulting in delayed and fragmented access.

It is important to note that during this last round of negotiations, some pharmaceutical companies could not reach an agreement regarding the proposed discounts and thus remained off the reimbursement list. Such a move could possibly indicate that some of these manufacturers might have felt that the potential increase in sales volume would not be large enough to offset the reduction of direct profit margins. Assessing the potential gained from market expansion based on prevalence and epidemiology data will help manufacturers determine the exact level of discounting they can offer while remaining competitive in the Chinese pharmaceutical landscape.

Overall, the multiple updates issued to the NRDL in 2017 following a 6-year hiatus present a positive sign for the pharmaceutical industry. Previously, multinational corporations were extremely concerned about the lack of periodic reviews assessing newer therapies for reimbursement. Although the secondary reimbursement negotiations witnessed in July 2017 are by no means a definitive indicator of the frequency of future NRDL updates, they are a sign that newer therapies are gaining consideration sooner, particularly if price discounts are on the table.

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