China Expedites Price Reduction of Anticancer Drugs

In the recent years, medical reform has taken the center stage in China. In an attempt to reduce high drug prices and improve its medical insurance coverage, the country has initiated a series of new moves, including the recent zero import tax on a range of anticancer drugs, an accelerated approval process for overseas new drug listing, and further encouragement of domestic generic and innovative medicine development.

Riding on this wave of advancements in medical insurance, medical care, and medicine, the country’s healthcare landscape is changing rapidly. The pressing problem of expensive medical treatment is gradually being addressed. So far, the majority of drugs commonly used in the clinical practice with good results has been included in China’s National Reimbursement Drug List. However, some high-priced, life-saving drugs, such as anti-cancer medications, are still a heavy burden to most insured patients. This is an urgent issue for Chinese medical reform.

Sales of the 36 drugs included in the second round of drug price negotiation increased by an avergae of 40% in 2017

Since 2016, the former Chinese National Health and Family Planning Commission has organized a national-wide drug price and reimbursement drug list negotiation. At this point, a total of 39 products have been successfully included.

In 2016, when China started its first round of negotiations, only three medicines were covered, primarily because of the lack of competition among invited pharma companies. By 2017, the Chinese government had learned its lessons and initiated the second round. This time it invited multiple competing products into the negotiation, which greatly stimulated the competition. Ultimately, 36 drugs were successfully included.

Field

Product name

Company

2016 sales

2017 sales

($ million)

Growth rate (%)

Anti-cancer drug and immune modulators

Rituximab

Roche

339.74

398.82

17.39

Trastuzumab

Roche

265.88

354.51  

33.33

Bevacizumab

Roche

147.71

194.90

30

Bortezomib

Janssen

88.63

125.55

41.67

Canyi capsule

Yatai

73.86

81.24

10

Nexavar Filmtabletten

Bayer

88.63

103.40

16.67%

Nimotuzumab

Biotech pharma

88.63

100.44

13.33

Recombinant human endostatin injection

Yantai Medgenn

59.08

70.90

20

Erlotinib

Roche

59.08

56.13

-5

Astragalus Polysacharin

Sinopep

22.16

22.16

0

Apatinib Mesylate Tablets

Hengrui Medicine

36.93

59.08

60

Fulvestrant

AstraZenaca

13.29

17.73

33.33

everolimus

Novartis

4.43

5.91

33.33

Lenalidomide

Celgene

4.43

5.17

16.67

Abiraterone

Janssen

2.95

14.77

400

Lapatinib ditosylate

GSK

2.95

4.43

50

Recombinant human IFN β-1b

Bayer

< 1.47

< 1.47

-         

Chidamide

Chip screen

< 1.47

1.47

 > 40

Compound Huangdai tablet

Tiankang

< 1.47

1.47

> 40

Cardiovascular drugs

Lyophilized Recombinant Human Brain Natriuretic Peptide

Chengdu Nuodikang Biological 

73.86

103.40

40

Ginkgolides injection

Baiyu

73.86

73.86

0

Ginkgo Lactone Meglumine

Kanion

16.25

25.11  

54.55

Allisartan Isoproxil

Salubris

< 1.47

1.47

50%

Sensory system drugs

Ranibizumab

Novartis

59.08

81.24

37.5

Conbercept

Kanghong

44.31  

62.04

40

Nerve system drugs

Seroquel

AstraZeneca

44.31

59.08  

33.33

Paroxetine

GSK

< 1.47

< 1.47

-         

Blood system drugs

Ticagrelor

AstraZeneca

29.54

38.40

30

Recombinant human blood coagulation factor VIIa

Novo Nordisk

14.77

19.20

30

Tolvaptan

Otsuka Pharmaceutical

4.43

6.65

50

Recombinant Human Prourokinase for Injection

Tasly

<1.47

2.21  

>100

Digestion system drugs

Liraglutide

Novo Nordisk

27.07

31.02

16.67

Anti-infection drugs

Posaconazole

Janssen

5.17

6.65

28.57

Morinidazole and Sodium Chloride Injection

Hansoh

<1.47

<1.47

-         

Others

Lanthanum carbonate

Shire

2.95

4.43  

50

Genitourinary system drugs

Sevelamer Carbonate 

Sanofi

<1.47

2.95

>100

Total

1698.67

2141.80

26.09

(Dollar to Yuan = 1:6.77)

The achievement from these two rounds of negotiation is dazzling. On average, they managed to reduce the drug price by over 50%, reaching the lowest price level across the globe. It has now been a year since the second-round negotiation. So how are the 36 drugs doing?  

In the second half of 2017, the saving was significant. In total, it managed to reduce total patient spending by about $428 million (Dollar to Yuan = 1:6.77). The majority of achievements occurred in the cancer drug field, primarily because a large portion of 36 negotiated drugs in 2017 are anticancer medicines.

On the other side of the coin, the total revenue of these 36 drugs has increased from $1.70 billion in 2016 to $2.14 billion in 2017. According to the Health Executive, their overall growth rate has also increased, exceeding 26% in 2017. This is more than twice the growth rate of the entire Chinese pharmaceutical industry last year.

Worth noting is that a number of drugs have achieved very positive results after joining the list. One example is gefitinib. From 2013 to 2015, it maintained an annual sales growth rate in China of only around 5–10%. However, after joining the national insurance list in 2016, although its price was slashed down by 55%, its sales growth rate soared significantly, reaching 80% in 2017. Other honorable mentions include Renagel from Sanofi and Azilsartan from Salubris Pharmaceuticals. Overall, these drugs’ sales growth has exceeded more than 300%.

Clearly, China’s national drug price negotiation has succeeded in these cases. It has also laid a solid foundation for these pharma companies and positioned them for sustainable growth in the Chinese market.

Sales increase does not mean a profit increase – an unignorable issue

Drug price negotiation can be a double-edged sword, however. If the price decline is too large and the increase of sales volume cannot keep up, the “low-price/high-volume” strategy will be hard to achieve. Further, there is the possibility of “losing money to earn money.” In another words, only when the increase in sales volume exceeds the decline of price can pharma companies benefit from the drug price negotiation and drive up their profits.

In the light of drug negotiation, the majority of the products achieved a substantial sales increase in 2017 after inclusion in the national medical insurance list. Clearly the drug price negotiation strategy has accomplished its low-price/high-volume” strategy goal. However, to achieve profit growth requires a significant amount of sales volume expansion, large enough to exceed the effect of price decline. When taking a closer look at the table above, it is not hard to notice that the growth of some products has actually decreased.  

This is a very important issue. If the majority of drugs begin to lose money after the national drug price negotiation, this will undoubtedly dampen the enthusiasm of future participating pharma companies. At the end of the day, pharmaceutical companies want to do business. It is natural for them to seek profit.

The third round of national drug price negotiation

The Chinese National Health Security Bureau is about to start the third round of national drug price negotiation, with a focus on anti-cancer drugs. It is expected that another series of life-saving drugs will greatly reduce their prices and join the national reimbursement list. The bureau is already in touch with some pharmas and has started the communication. So far, 10 overseas and eight domestic companies have joined the conversation and pledged to actively cooperate with the Chinese government.

The inclusion of high priced anti-cancer drugs into the national medical insurance list is a triple-win situation: for patients, businesses, and for the government. It not only reduces the drug price and brings previously expensive anti-cancer drugs to more patients. Getting the right balance of drug-price decrease and sales-volume increase can also translate into a profit rise for pharma companies. At the same time, it serves to protect the sustainability of China’s national health insurance, decreasing its expenditure and society burden. Together, the national drug price negotiation could effectively balance patient’s clinical needs, corporate profits, and the national healthcare fund’s affordability.  

China accelerates the approval overseas medications

To fundamentally reduce the drug price and give a broader medication access to its people, China is also pursuing other actions, such as accelerating the approval process of overseas medications.

Great success has already been achieved in this area. At the end of April this year, China quickly approved the long awaited nine-valent anti-cervical cancer HPV vaccine. From application to reaching the market, the process took only eight days. It is a reflection of China’s changing mindset, strong dedication to improving its healthcare system and aspiration to become a leader in the global pharmaceutical industry. Right now, China is slated to expedite its approval process of international listed new drugs. In particular, it has simplified the approval procedure for medications used to treat rare diseases and serious life-threatening conditions. In addition, it has changed the pre-market registration inspection of imported chemicals to a post-listing supervision sampling.

Through these efforts, the total time spent on clinical examination and approval for new drugs in China has already been shortened and become closer to that of leading healthcare countries, such as the US, Europe, and Japan. In a further effort to bring urgently needed drugs to patients more quickly, China has set up a priority approval channel. This is expected eventually to cut down the time to market by another 1–2 years.

In the meantime, the Chinese are also actively strengthening their national monitoring and early warning system to prevent the shortage of medicine supply. They have increased the reserve and established a recording policy for shortage and production suspension of drugs and APIs, with the goal to ensure the continuous supply to patients.

Strengthening the capability to develop innovative and generic domestic drugs

To really drive down the cost of anti-cancer drugs, it is important to encourage the research and development of China’s own innovative and generic drugs in addition to bringing in overseas medicines at faster speed. High-quality, low-price local competitors present the real, long-term solution.  They are able to replace the high-priced original drugs and slash down the overall cost.

China has been stepping up its efforts to bring high-quality domestic generic drugs to its market. So far, there has been some success. The efficacy and safety of self-developed chemotherapeutic drugs are already close to the international standards. However, there is still a gap between China and the leading countries, especially in the field of targeted anticancer drugs. Currently, China still largely relies on imports. 

Why doesn’t China have high-quality, low-price generic drugs?

Drilling down to the root cause, the modern Chinese pharmaceutical industry started very late and has lagged behind the world’s leading countries. Catching up requires a significant amount of primitive accumulation, which has been missing in China. Thus, to satisfy its people’s healthcare needs quickly, Chinese pharma companies have produced a vast number of low-quality generic drugs in various formulations. This has made it very difficult to compete with high-quality original drugs from abroad. China is also slow to bring new medications to its patients. This has led to a unique phenomenon in China, in that even if the patent of the original drug has been long expired, it can still rack up a notable amount of profit and dominate the market.

This has become an extremely serious problem recently, primarily because of the country’s aging population and fast-growing number of cancer patients. In the face of the increasingly large public need and market expectation, in April this year the Chinese State Council issued a proposal to include generic drugs with comparable quality and efficacy to the originals into the original replacement drug list. This is an attempt to substitute the originals and enhance the application of generics.

However, this is just one part of the equation. Importantly, China has to drive up its own domestic medication innovation. Right now, copycats dominate the Chinese market. Although a number of China-developed innovative drugs has entered the priority review and approval process or have been listed, they still face the dilemma of market access, thanks to the difficulties in medical reimburse system, bidding mechanism, etc.

Clearly, China needs to take further steps to improve its pharma industry environment and policies. Coupled with enhanced R&D and production capabilities in innovative drugs and high-quality generic drugs, it will be possible to fundamentally raise its drug accessibility and alleviate the economic burden for its people. 

Jin Zhang M.D., Ph.D is project and account manager at LakePharma, and editor at The Pharmaceutical Consultant.