Published in pharmaphorum Deep Dive
The sheer size of China’s population (1.4 billion) has long made it an attractive market for pharma in terms of potential volume, especially in the context of rising affluence associated with a growing middle class. In 2017, China was ranked the second largest pharmaceutical market in the world, behind the US. However, it has traditionally been a challenging market to launch into, particularly for manufacturers developing innovative and novel therapies.
Recent changes to China’s regulations under its 2025 Made in China strategic plan – including an expedited market access process, more frequent updates to Reimbursed Drugs Listings and additional routes to reimbursement – look set to transform this paradigm and necessitate a reconsideration of manufacturers’ strategies to obtaining optimal pricing and reimbursement (P&R).
The traditional route
Acquiring marketing authorisation in China via the CFDA (China Food and Drug Administration) used to be a lengthy and bureaucratic process, which mandated that East Asian patients’ data was included in clinical trials. As a result, drugs in China become listed as much as seven or eight years later than mature markets such as the US, Europe and Japan. Historically, only 25% of new launches even ever made it to China – from 2001 to 2016, only 100 of 433 innovative drugs launched in mature markets were launched there. Following CFDA approval, manufacturers traditionally considered three funding routes:
1. Out-of-pocket (OOP)/Patient assistance programmes (PAP)
The self-pay mechanism has typically been the first route considered by manufacturers, prior to their product being included in national/provincial drug lists. Despite a rising middle class, patient affordability remains a big concern. Out-of-pocket costs can be high and many patients are not able to afford the full cost of therapies. PAPs are commonly used to help these patients, allowing them to gain access with low OOP costs. PAP agreements are often based on patient affordability and commonly take the form of, ‘buy A, get B free’. For example, under the Opdivo (nivolumab) PAP, a patient will buy five cycles of treatment and Bristol-Myers Squibb will then provide six cycles for free. Merck is looking to establish a slightly more sophisticated PAP for Keytruda, whereby patients experiencing no side effects on their initial three months of Keytruda treatment will be given the next three months free.
2. Reimbursed drugs lists
National reimbursed drugs list (NRDL): The NRDL includes a list of therapies that are partially, if not fully, reimbursed for eligible patients. The list is approved nationally; provinces subsequently need to include the drugs onto their provincial reimbursed drugs list (PRDL). While the NRDL was officially supposed to be updated every five years, no updates were made between 2009 and 2016, and the process to gain inclusion on the listing was unclear. This meant it was a challenging, long-term strategy for manufacturers wishing to gain broad access via this route.
Provincial reimbursed drugs list (PRDL): After receiving marketing authorisation, manufacturers can enter negotiations with provinces directly and be listed on their PRDL. However, the frequency and nature of updates made to PRDLs varies significantly across China; affluent provinces tend to make more frequent updates and include new innovative therapies, while others are more restricted. For example, ZheJiang province has updated their PRDL three times in the last three years, adding innovative therapies onto their list more frequently than the NRDL, and creating variations in product access based on your province – a trend which can also be seen in major markets such as Canada and UK. In 2018, ZheJiang entered negotiations directly with manufacturers and added 21 drugs to their provincial formulary, including newly approved CFDA therapies and seven therapies that did not reach provincial negotiations in 2014.
3. Private health insurance (PHI)
While traditionally only a small proportion of the Chinese population were covered by PHI, those who were covered were often able to access high cost innovative therapies not yet available through the NRDL/PRDL. Increasing urbanisation and a growing middle class has resulted in a deepening penetration of PHI, with an estimated 5% of China’s population now covered, representing more than the entire population of the UK.