Shanghai Health & Health Development Research Center
Top KOL in the field of medical reform in China who is a Director for the Shanghai Health & Health Development Research Center and is also an adjunct professor and doctoral supervisor at Fudan University. He is also in charge of constructing evidence based medicine practices and health economics in the Shanghai Public Health Three Year Action Plan and is the Secretary General of the Shanghai Health Economics Association.
Section 1: Current Landscape & Latest Developments
1.1. What are the main routes to market access in China & what are the key challenges?
The only route for a product (e.g., drug, medical device) to access the Chinese market is through the NMPA (National Medical Products Administration, formerly “CFDA.” The NMPA requires the manufacturers to prepare a list of clinical documentation to be submitted before the product can be approved and enter the market.
When the drug is approved by the NMPA and introduced to the market, it has a chance for public reimbursement which is to go through the approval process of NHSA (National Healthcare Security Administration) and be included in the NRDL (National Reimbursement Drug List).
Currently, 96% of the Chinese population is covered by public medical insurance, which covers 300 million urban workers and one billion regular residents. Therefore, being included in the NRDL is equal to having an access to the entire Chinese population.
As China has a large population with various clinical needs, an increasing number of reimbursement channels have become available at the provincial level, such as critical illness insurance and a dedicated fund for rare diseases in Jiangsu province.
Drugs that are not reimbursed by public insurance (e.g., CAR-T) can be reimbursed through commercial insurance or Huiminbao (government-backed commercial insurance). The Shanghai Huiminbao, which is called Huhuibao locally, covers about six to seven million residents in Shanghai.
1.1.1. Private healthcare & out-of-pocket
Although commercial insurance and the patient OOP (out-of-pocket) payment provide a new route to market access, their market shares are limited. For example, the annual national healthcare expenditure is 2.6 trillion CNY, while the annual expenditure of all commercial insurances is 400 billion CNY. The insurance coverage of Huiminbao insurance is even smaller, which is about 10 billion CNY per year.
1.1.2. Public reimbursement
There are two main routes to NRDL access.
First, originators that have been available in the Chinese market for less than five years can be added to the NRDL after successfully going through the price negotiation process with the NHSA.
Second, a generic drug can be added to the NRDL through the ‘4+7’ volume-based procurement mechanism.
The ‘4+7’ volume-based procurement (VBP) mechanism will only be triggered when more than three generics are approved by NMPA, and all generics have passed the Consistency Evaluation (i.e., therapeutic effect consistency assessments一致性评价) compared to the originator.
Once the ‘4+7’ VBP is triggered, there are three requirements are followed during the bidding process.
1) The highest bidding price should be no more than 1.8 times the lowest bidding price.
2) The price of the smallest unit of the drug is below 0.1 CNY.
3) The drug price has been reduced by more than 50% of its market price.
During the bidding process, companies will offer the quotes, and the number of successful tenderers will be determined by the number of companies that take part in the bidding. Regardless of how many companies take part in the bidding process, the number of successful bidders should be no more than 10, and the ranking of the offered price determines the bidding result. For example, there will be four successful tenders out of six bidding companies, and the four companies that offer the lowest price will win the bid.
1.2. What factors are influencing reimbursement on the National Reimbursement Drug List (NLDR)?
1.2.1. Drug approval time & category
Every year, the NHSA will propose preliminary conditions and criteria for originators to be eligible to take part in the NRDL negotiation process.
“Five-year post approval by NMPA” limitation for originators – the originators have to be approved in less than five years. For example, the drug has to be approved after January 1, 2017, to be eligible for the NRDL negotiation list in 2022.
Some rare diseases, pediatrics, and generic drugs are exempted from a) drugs that were promoted vigorously by the central government for the year have the chance to be included in the NRDL negotiation list without the “five-year” limitation.
Drug manufacturers will submit their application to NHSA to review whether the drug aligns with that year’s requirements for the NRDL negotiation process. Drugs that have passed the review will then be submitted to an expert team at NHSA combined with payer advising KOLs for further clinical and pharmacoeconomics review.
1.2.2. Clinical value of drug
The clinical expert team in the NHSA will evaluate the drug based on its clinical value, mainly efficacy, and safety.
Meanwhile, they will evaluate its economic efficiency, innovativeness, and whether the drug has met the current clinical unmet needs. If the drug passed the expert team’s comprehensive evaluation, it would be passed along for pharmacoeconomics analysis.
1.2.3. Pharmacoeconomics analysis/negotiation from the NHSA
There is BIA (budget impact analysis). Pharmacoeconomics experts will evaluate the impact a new drug can have on the annual budget of the national medical insurance fund if the drug is added to the NRDL.
CEA (cost-effectiveness analysis). NHSA invites professors from universities to conduct CEA. ICER (incremental cost-effectiveness ratio) is a major tool used to estimate the NHSA negotiation drug price.
Both the BIA and CEA reports will be submitted to NHSA to determine the final negotiation price (“envelope price”), which remains unknown to the drug manufacturers’ side.
1.2.4. Submitted drug price by manufacturer during NRDL negotiation
Once the negotiation process starts, the drug manufacturer will present the drug price quote. If the presented price is within the +15% range of the NHSA “envelop price”, the drug is eligible to be included in the NRDL. If the manufacturer’s price exceeds the +15% threshold, they will have a second chance to propose a revised quote to land within the 15% range of the envelope price. However, if the price is still over the 15% range of the NHSA price, the manufacturer will lose the bid.
1.3. In what ways is national policy changing to accommodate international competition?
Before 2018, the national health medical insurance department was under the Ministry of Human Resources and Social Security (中国人力资源和社会保障部), along with basic pension plans, employment injury insurance and etc. NHSA (中国医疗保障局), an organization specializing in national medical insurance, was founded in 2018 by the national government. This is a drastic change in the CCP’s (Chinese Communist Party) organizational structure in China.
The NHSA then presses ahead with reform in three aspects.
1) DRG/DIP payment system reform.
2) Established the ‘4+7’ volume-based procurement mechanism and NRDL negotiations to solve the problem of the virtual-high medicine price. Before the NHSA reform, the reimbursed drug list remained the same for 7 years. Since 2019 (after reformation), adjustment to NRDL needs to be made every year to lower the price of existing drugs and offer a chance for new drugs to be reimbursed.
3) Information and medical funds reconstruction towards a more centralized model – Provincial HSAs have less autonomy on drug list adjustment and reimbursement. All medical funds at the municipal and provincial governments are managed at the national level after 2018.
1.4. What are the common challenges during the product approval process? What can biopharma companies do to overcome these challenges?
1.4.1. Drug Approval
Since NMPA attaches great importance to the clinical value of a product, the quality of clinical trials needs to be ensured, and clinical trial outcomes are critical in terms of registering the product in China.
The clinical comparator needs to be wisely chosen for the NMPA approval. The NMPA would like to see a clinical comparator with great efficacy and safety level. Trials with a placebo as a comparator are less preferred than head-to-head trials.
The Chinese Human Genetic Resource Administration (中国人类遗传资源管理办公室) prohibits the transportation of domestic samples, including urine, blood, and also genes. Additionally, there are very strict regulations for foreign companies to view Chinese data. This will prolong the drug approval timeline for international companies.
1.4.2. NRDL inclusion
NHSA will consider whether there is a significant improvement in its efficacy compared to the existing drugs in NRDL or whether the drug price can be greatly reduced as there is already an existing drug in the NRDL with similar efficacy level. In the long run, it is necessary for companies to develop innovative drugs instead of “me-too drugs”. Manufacturers need to be prepared to reduce their drug prices if the drug’s efficacy is not much better than the existing drugs that are in NRDL. The drug manufacturer must achieve a balance between the drug price and its efficacy and safety.
Currently, both NMPA and NHSA have a heavy workload due to a great number of originators being approved in China. NHSA has proposed different internal policies to accelerate the approval process. The quickest approval process only takes about one to two months. NMPA has also been trying to add new routes for approval and gearing to international standards to accelerate the approval process of new drugs.
Section 2: Future Market Access Topics & Trends
2.1. What are China’s health priorities & what roles does biopharma play in China’s future healthcare vision?
China’s health priority is to develop innovative drugs domestically. Before 2015, drugs that were manufactured by China were mainly generics. Since 2015, the national policy starts to encourage innovation, and biotech companies have emerged due to a large number of talents returning back to China from overseas. Still, they have been mainly working on “me-too drugs” rather than “first-in-class” drugs. These companies need to strive to make “first-in-class” drugs. Otherwise, it is challenging to gain large profits in the Chinese market as the profit margin for “me-too drugs” and generics is very limited in China.
China enjoys a large market with various clinical needs, so new technologies and new raw materials will have a big market in China. Even though many of the medical needs have been met with more drugs becoming available in the Chinese market, drug manufacturers still need to work on producing better products to meet higher requirements. Therefore, biopharma will play an important role in China’s future healthcare vision as they need to provide cost-effective products and balance drug price and efficacy.
TCM (Traditional Chinese Medicine) and Chinese herbal medicine are not developing well at present. Quality control from seeding to planting is not ensured. We can see the trend that the Chinese government is trying to promote Chinese herbal medicine and TCM use – out of all 2860 drugs included in the NRDL, 1374 are TCMs. In the future, the promotion of TCM will be continued but will hardly take up all market share in China as TCM is still under development.
2.2. To what extent are digital health & med-tech trends impact China’s market access priorities?
Currently, disruptive technologies such as digital health & med tech are under development, especially AI technology used for treatment diagnosis, game therapy used for depression treatment, and APP and digital tool usage in the field of orthopedic rehabilitation to increase accessibility and adherence of the patient.
I acknowledge that digital health & med tech has already been applied overseas. However, we are still trying to figure out which specific area of digital health and med tech is more effective for the domestic market. The key issue to be addressed in China is whether digital health & med-tech-related costs can be reimbursed, which RWE (real-world evidence) data will play a critical role in demonstrating the benefits digital health & med tech can bring to patients. We are following up, experimenting, and applying digital health & med tech in China, but we have not reached a stage where it can be used and reimbursed in a wide range.
2.3. How is health economic evaluation changing in China? What implications is this having on reimbursement?
There have been great changes in health economic evaluation in China since NHSA’s foundation.
China is following up the international standards of setting a drug price through negotiation based on pharmacoeconomics and budget impact analysis.
The HTA (health technology assessment) will gradually play a larger role in the cost-effectiveness evaluation of new drugs and devices. This provides proof of whether a new product should be reimbursed.
The NRDL evaluation may have a preference for domestic manufacturers if two drugs have the same MoA (mechanism of action), same efficacy, and safety. However, the NRDL negotiation process and standard of NRDL access are the same for both domestic and foreign companies.