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China’s State Council has announced to its people and to the world that the second largest drug market will become a world leader in pharmaceutical innovation, commercialization and manufacturing. Simply put, China will no longer rely on research-based multinationals corporations (MNCs) as they’ve done in the past. Going forward, they don’t intend to simply stand beside them awaiting western product introductions.

China sees no need for subtlety; choosing instead a “shock and awe” approach. Since making its intentions clear, the State Council directed and the CFDA have formulated and fired off a succession of regulatory guidelines aimed at transforming its pharmaceutical sector. PaizaBio reported on this earlier this week in great detail when we revealed the mosaic of regulations and what they mean to the West.

The ink wasn’t yet dry on our missive when the Ministry of Human Resources and Social Security (MoHRSS), the responsible governmental body for drug pricing and reimbursement, issued a request for public comment* on a large number of very critical things that will affect drug pricing, reimbursement and acceptance of drugs for the National Reimbursement Drug List (NRDL).

China’s administrative troops have their marching orders from the State Council and this is an example of how the various ministries are attempting to formulate guiding policy to fulfill government directives. Onward ho!

Once implemented in their current or adjusted form, the points from MoHRSS will completely disrupt pharmaceutical pricing models across the board! MNCs will need to quickly adjust their commercialization and pricing strategies to conform with the new Chinese market realities created by all of the reforms.

The MoHRSS previously promised to establish new pricing mechanisms in 2016, in a document released in September 2017, and published by GBI Health. The new notification seeks feedback on the following six key issues:

  1. How to strike a balance between meeting clinical needs and encouraging innovation, while taking into account the financial capabilities of Basic Medical Insurance (BMI) funds during the adjustment process. In other words, which diseases should we reimburse drugs for to meet clinical needs – basic drugs, all cancer, some cancer? China recognizes, as other nations have, that it cannot reimburse everything; there need to be practical priorities.
  2. In terms of the adjustment scope, what approaches and regulations should be adopted in relation to selection of drugs according to newly approved drugs, on-patent drugs, non-exclusive varieties (generics), and non-RDL drugs available on the market that are usually Western branded and especially expensive Western branded.
  3. How to insure an objective process that accommodates the view of various stakeholders, making use of pharmacoeconomic and other evaluation methods, as well as employing standard metrics to support an expert review mechanism. In essence, pharmacoeconomic means that COST/BENEFIT analysis will be used including QLY (quality adjusted life year – cost of drug for extra year of a quality life). This is one of the tools often employed in the United Kingdom’s NICE (National Institute for Health and Care Excellence) and is becoming standard across the EU. To support formulary decisions, this type of approach will likely become standard practice in the United State in the near future. In practical terms, is an extra 12 weeks for grandma to be in the nursing home worth $120,000 in the US, $80,000 in Germany or $40,000 in China?
  4. How should drugs that undergo price negotiations be incorporated within the mechanism, including principles for determining the effective period of negotiation results, and how to link these with BMI payment standards.
  5. How to effectively coordinate and link together drug reviews and approvals, production and distribution, clinical application, and medical insurance payments. For MoHRS this means, “How do we get patient access to new drugs and then pay for it?” Good question!
  6. And finally, what kind of exit mechanism is required for de-listing NRDL drugs. This is a BIG issue. The NRDL was just revised – the first time since 2009 – in February 2017. It increased from 2,151 drugs to 2,535, and among these are 1,297 “Western-style” chemical drugs with the balance being Traditional Chinese Medicine. Many of the traditional medicines have not been shown to demonstrate safety or efficacy, but have been used to treat diseases for years. Of the 1,297 western drugs, almost all are small molecule (chemical) drugs and virtually all are generic/Chinese generic.

Here’s where it gets sticky. Most of the Chinese generics were approved without formal bioequivalence studies. Keep in mind; the CFDA has mandated that all “generics” be “high quality generics” and have to have demonstrated bioequivalence by late 2018. Reading between the lines, there is great concern on how to formally remove Chinese generics from the NRDL that fail to meet the “high quality” designation.” At the end of the day, the CFDA will have the final word.

The MoHRSS has laid out a tremendous amount of information for comment. The implications of the final decisions are huge; PaizaBio – along with the rest of the global pharmaceutical industry, will be watching closely as China’s regulatory mosaic continues to reveal itself.

*Interested parties have until May 30, 2017, to email views to the MoHRSS.

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