With a population of 1.4 billion, China accounts for 18 percent of the world’s population and 18 percent of the global pharmaceutical market, valued at $137 billion. Annual drug expenditures are increasing rapidly. Although these numbers and opportunities are eye-catching, international manufacturers face significant challenges to gain favorable pricing, reimbursement, and market uptake in the country, as more than 90 percent of the drugs registered in the nation are generic.
Within the last five years, the Chinese government has made great strides towards its goal of providing healthcare coverage for all citizens, including those in rural areas, with around 95 percent of population covered under their universal healthcare system. The state’s health system and regulatory framework are expected to change even more in the next ten years as the nation moves towards an evidence-based health policymaking strategy with the institution of “Health China 2030” launched in 2016.
China’s Payer Stakeholders
In China, the key agencies that play a role in the pharmaceutical registration, pricing, and reimbursement process include the National Medical Products Administration, the National Center for Evaluation of Medicines and Health Technologies, and the National Healthcare Security Administration.
National Medical Products Administration (NMPA)
The National Medical Products Administration oversees the approval of all new medicines and clinical trials in China. Priority consideration is given to drugs on the essential drug list (EDL), including drugs used to treat rare diseases, chronic diseases, oncology, and pediatrics medicines, along with emergency medicines. All drugs must be approved by the NMPA to be added to the National Reimbursement Drug List (NRDL). The national basic medical insurance then covers between 50 to 70 percent of the drug’s cost.
National Center for Evaluation of Medicines and Health Technologies
In 2018, the National Center for Evaluation of Medicines and Health Technologies, a formal health technology assessment (HTA) body, was established. The National Center for Evaluation of Medicines and Health Technology assists in the evaluation of clinical necessity (e.g., unmet need), safety profile, clinical effectiveness, and reasonable pricing for drugs with the same indications, following the pharmacoeconomic principle before price negotiation for innovative patent drugs. Additionally, the HTA will have branches focusing on specific disease areas, such as oncology, cardiovascular disease, and pediatrics to act as experts in the review process.
National Healthcare Security Administration, NHSA
As of 2018, The National Healthcare Security Administration, NHSA manages the price negotiation, known as the National Reimbursement Drug List. Drugs that make it on this list are covered by national health insurance, available to nearly all Chinese citizens today.
Important Points to Keep in Mind
The Chinese government strictly controls the price of new medicines, and the price-setting process in China takes place separately from reimbursement. In 2017, 36 innovative patent drugs were added after price negotiations with the Ministry of Human Resources and Social Security, now controlled by the National Healthcare Security Administration. Even with a stricter negotiation process, drug prices were cut by an average of 44 percent.
During the negotiation process, manufacturers can submit a package including clinical and safety data, prior sales and sales forecasts, and pricing information with health economic evaluation and budget impacts.
After this decision, companies must enter negotiations with the reimbursement boards of the national and provincial insurance programs.
Long-Awaited Updates to the National Reimbursement Drug List
The National Reimbursement Drug List (NRDL) determines how drugs are covered under both national and provincial health insurance programs in China. Formulated by representatives of five government agencies, the NRDL consists of two parts: List A and B. The NRDL was last updated in 2017 with 339 drugs added, including drugs for oncology, cardiovascular, hematology, neurology, anti-infectives and traditional Chinese medicines.
Provincial Reimbursement Drug Lists – variants of the NRDL – include a slightly expanded portfolio of drugs beyond the NRDL that are deemed important by the provinces for their indigenous populations.
List A consists of widely used, mostly inexpensive drugs, generic drugs, which are considered indispensable. These are fully reimbursed by both national and regional hospital systems. One key subset of List A is the Essential Drugs List, which outlines medicines that receive relatively high levels of reimbursement by the government.
While the EDL contains more than 300 Western products, including newly added chemotherapy and cholesterol drugs, this list is dominated by local brands and generics. Inclusion in this list opens the door to the full spectrum of China’s pharmaceutical market but tends to be a volume-driven model for growth at generics-level pricing.
List B includes premium drugs that are partially reimbursed on average between 50 to 90 percent, with provincial governments given leeway to add or remove about 15 percent of products on their regional lists to account for local disease trends or provincial hospital demand. Reimbursement for medicines falling into this category is partial and sporadic.
Implications for Industry
Local Partnerships are Critical
For pharma companies, especially multinationals, navigating China’s reimbursement system is becoming less complex; however, the key to capturing – or forfeiting – widespread market access comes from local partnerships. Exposure to this multi-tiered system creates significant price pressures and the need to forge strategic partnerships or alliances with local manufacturers and/or distributors, to leverage their market knowledge, geographic access and R&D capabilities to strengthen market entry opportunities.
In China, the most salient feature of its pricing and reimbursement process is the recent adaptation of a formal application process for listing on the NRDL. Every year, the group of government stakeholders responsible for maintaining the NRDL creates a list of candidates for inclusion; an expert advisory board then reviews the list and posts final decisions and corresponding prices.
The institution of a new standardized process for obtaining reimbursement in China underscores the need for a strong local partner with deep stakeholder knowledge and relationships in-market. Further, you must possess the tools to communicate with stakeholders, patients, members of the media and beyond. GLOBALHealthPR can help you map and implement your strategy for engaging and communicating to these key players in China.
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