China to Initiate Reimbursement Negotiation for Innovative Drugs, Risk Sharing May Be on the Way

China's Ministry of Human Resources and Social Security (MoHRSS) has started considering the initiation of a drug pricing and reimbursement negotiation system to include expensive but effective innovative drugs into the country's national health insurance drug formulary. According to a report by the 21st Century Business Herald, U.S. drug major Eli Lilly's General Manager Eric Baclet noted that the company's oncology agent Alimta (pemetrexed) is expected to enter into pricing and reimbursement negotiation with the Chinese government. The MoHRSS has already held a consultation meeting with some multinational pharma companies and the negotiation is set to launch in the next few months, added the company's vice General Manager Jun Xing.

Oncology Drugs Set for First-Round Priority, Selection to Be Based on Panel Recommendation

Anti-cancer treatments are reported to be the focus of the initial-stage negotiations between the MoHRSS and pharmaceutical companies, although there has been no official confirmation about this. Leading domestic firm Simcere's head of policy department, Xianghong Luo, also revealed that there are currently over 10 drugs awaiting negotiation including two of Simcere's products. Nevertheless there are no confirmed plans yet.

In terms of the procedure of the new negotiation mechanism, Luo said that the selections of drugs for negotiations will be based on the recommendations of a panel of experts, who will choose expensive drugs with high medical need. The MoHRSS will then consult with the pharmaceutical companies before starting the negotiations. Drug makers cannot apply for the negotiations.

Outlook and Implications

Although the establishment and details of the said negotiation system are still lacking confirmation from the government, it is still an encouraging sign for the multinationals, whose expensive innovative drugs have been shunned by the essential drug list and the national formulary. At the end of last year, the MoHRSS released the country's new Basic Health Insurance Formulary (BHIF) as part of the ongoing national healthcare reform (see China: 2 December 2009: China Releases New Basic Health Insurance Formulary, All 307 Essential Drugs Listed). The formulary has excluded the entry-through-negotiation drugs, those expensive treatments with significant efficacy to meet medical need. The forthcoming initiation of the negotiation system is projecting a promising prospect for drug manufacturers, especially those with oncology products. By contrast to the basic drug formulary, which was dominated by domestic generic makers' products, the drugs to enter into negotiation will primarily include innovative products from Big Pharmas. As for Simcere, it is likely to involve the company's patented oncology agent Endu.

By setting reimbursable prices through negotiations with drug makers, the MoHRSS is aiming to reduce the costs of expensive patented drugs while ensuring patient access. In terms of the pricing and reimbursement mechanism the negotiations are going to reach, IHS Global Insight is expecting that risk sharing may be under potential consideration as increasingly seen in many other countries' pricing and reimbursement landscapes.

Nevertheless, the Big Pharmas are likely to face a long wait for the final benefit of the new system as it will take time for the MoHRSS to finalise the procedure and policy details. Following the negotiations, they will have to rely on the various policies of regional governments to put the results into place in their respective provincial formulary.

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