CHN’s NRDL Update – Worth the Wait (and Heavy Discounting)?

The Chinese National Reimbursement Drug List (NRDL), which, before February, was last updated in 2009, has received a much-needed modernisation. On February 21, 2017, the NRDL was updated, and then officially published two days later. The new version of the NRDL can be found here.

FIGURE 1. Formulary Structure of the NRDL in CHN

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The NRDL is set by several central government agencies, including the NDRC (National Development and Reform Commission), CFDA (China Food and Drug Administration), MoHRSS (Ministry of Human Resources and Social Security), and Ministry of Finance. Within the NRDL exist two lists: ‘LIST A’ and ‘LIST B’. ‘LIST A’ is primarily composed of older, generic drugs that are 100% reimbursed by the national government. ‘LIST A’ has significant overlap with CHN’s Essential Drugs List (EDL), a separate list created by the government, and last updated in 2012.

FIGURE 2. Formulary Updating Timeline in CHN

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‘LIST B’ includes premium and innovative drugs that are partially reimbursed (10%–90%) by the provincial and/or central governments. In other words, gaining a position on ‘LIST B’ is the best hope for broad and meaningful access for branded products commercialised by multinationals in CHN. However, these products on ‘LIST B’ are categorised by INN, not by the brand name. This means that once ‘LIST B’ placement for the INN is achieved, a source of the product must be established to provide reimbursed access. This source can be the original manufacturer, a manufacturer which has received marketing rights to CHN from the original manufacturer, or – most perilously – a local manufacturer that disregards the patent suite protecting the original manufacturer’s right to market the product exclusively. This policy means that innovative brands with patent protection in most / all of the world will have the same level of reimbursement as a domestically-manufactured, generic version of the INN.

There were about 300 new INNs, with two-thirds being TCM (traditional Chinese medicines). This mean that only about 100 ‘western medicines’ were added to ‘LIST B’.

Among these products, several included INNs that correspond to brands for which steeply discounted prices have recently been negotiated with the multinational company marketing the product in CHN. These negotiated discounts were significant and applied to products such as VIREAD® (tenofovir) from $GSK, IRESSA® (gefitinib) from $AZN, and even locally-manufactured Conmana® (icotinib) from BETA PHARMACEUTICALS.

In all three cases cited above, the products’ prices were reduced by over half: GSK’s VIREAD® was reduced from CHY 1,500 to 490 (67%), AZN’s IRESSA® fell from CHY 15,000 to 7,000 (53%), and BETA’s icotinib from CNY 12,000 to 5,500 (54%). While the original pricing of these products may have been influenced on other markets with higher ability to pay per capita, this magnitude of discounting should concern manufacturers who market their product in other countries with payers who informally reference other countries. While CHN has remained off of most countries’ reference market lists, these published reductions may cause these same countries to re-consider their policies. More concerning, a glance at the past reveals that many products added to the NRDL’s ‘LIST B’ in 2009 were then further reduced by CHN’s pricing authority, the NDRC (National Development and Reform Commission) – leading some to speculate that even these discounts from 2016 may not be sufficient to remain on the list.

The ministry also set 45 products on a “to-be-negotiated” list, half of which are targeted oncology therapies. Once agreements are reached between the government and manufacturers on pricing, these products could be added to the NRDL. The identity of these products has not yet been made public, but it is likely that if a sizeable discount is achieved (>50%), it will be trumpeted as a victory by the NDRC.

Of note, a ‘LIST C’ has been cited by the government and policy stakeholders in past years. The purpose of this list was to specifically address access needs for high-value, innovative products – possibly creating a supplement to products that are included on ‘LIST B’. However, last month’s NRDL update did not include such a list, and there is no current update on this theoretical ‘LIST C’.

As is part of policy and precedent, provincial governments will now make their own updates to the Provincial Reimbursement Drugs Lists (PRDL) by the end of July of this year. Notably, while NRDL placement is critical, ultimately provinces have the ability to flex their expenditure on ‘LIST B’ products by omitting reimbursement of about 10-15% of products, and redirecting financing to other products not on the NRDL. These PRDLs are the formal list of products available to the population within each province. It is important to note that provinces still only provide partial coverage, and patient cost-sharing is still a requirement, at times as high as 90% of total cost of therapy (though more commonly 20-40%).

The caveats to the NRDL update continue to mount when considering that the listing is only of the INN, and not the brand name – including those innovative products placed on ‘LIST B’. Given that tendering and hospital listing are still significant steps that must be undertaken by the manufacturer before actual use at the local level is possible, risk exists around these further commercialisation steps. First, given that the INN is being reimbursed, the door is open for local manufacturers to create generic or biosimilar versions of these newly listed products in the still largely undisciplined IP environment in CHN. Additionally, the tendering and hospital listing process is time intensive (each step taking up to six months), and by no means do they lead to guaranteed access at the local level.

As provincial governments convene, it will be important to monitor whether any additional progress on Severe Disease Insurance (SDI), which provides funding options for the latest therapies for severe conditions in certain provinces. SDI is still a model under development, with one of the more visible experiments in Shenzhen, where coverage up to 70% of the therapy’s cost is provided, while patients (or manufacturers’ PAPs) cover the remainder. While this 30% remaining responsibility for the patient is substantial for the high-value therapeutics in question, a rising upper-middle income class is increasingly capable of affording the contribution. It is still unclear as to how this SDI programme fits within the NRDL and PRDL systems.

Overall, while the update of the NRDL is a positive development from a healthcare coverage policy and industry relations perspective, the formulary of coverage is far from fully modernised. Many of the latest (and older) targeted therapies are still missing from the list – possibly among the 45 short-listed for additional price negotiations. Additionally, cost-sharing through this and the SDI programme are still significant, and require patients to make significant out of pocket contributions, or the manufacturer to provide PAPs to subsidise these costs. Further, the price discounts that were required to be considered for placement on ‘LIST B’ during this updating process were significant, with the very likely possibility of future reductions looming. The NRDL update is a positive signal to patients, physicians, and manufacturers, but still leaves many questions as to the future of access to modern medicines in CHN.

CBPartners advises multinational pharmaceutical and biopharmaceutical companies on their commercial planning, value, access, and pricing strategies in CHN and the broader Asia-Pac region. Contributors to this posting include Johannes Gambari, PhD (Johannes.gambari@cbpartners.com), and Cyrus A. Chowdhury (cyrus.chowdhury@cbpartners.com).

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