When the engine of innovation gets the green light of marketing authorisation, it is typically first in the USA, and sometimes for the EMA’s (European Medicines Agency) jurisdiction over much of Europe. Unfortunately, CHN (China) is too often one the last markets among the major and highest-tier of emerging markets to be considered for broad patient access. For many years, this status as a late-entry market was one largely decided by the local regulators who had major requirements, including local trial data needs that had to be satisfied in order to gain marketing authorisation. Given development timelines, such studies were rarely conducted on time, and led to overall regulatory timelines for CHN that would often extend past a decade. Over time, however, delays were also experienced simply due to intimidation from the CFDA’s (China Food and Drug Administration, 国家食品药品监督管理总局) process and requirements – a self-fulfilling cycle of delays was often the result. Of equal concern to multinational companies was the poor outlook for third-party-funding – whether from the government, a social-insurance-structured system, or by private health insurance, financing was a consistent question for both the short-term future of the therapy, and long term future of the portfolio. For the therapies that did receive public funding, such coverage would require significant price concessions. All of these factors in combination made the math very difficult to add up to making CHN a high priority for launch, even with 1.4b people supporting the opportunity.
For proof of this, all that is needed is a quick scan of the National Reimbursement Drug List (NRDL), which reveals how few recent advances in clinical innovation have reached the most expansive means of patient access in the world’s largest country by population. This scarcity of public coverage for the latest advancements is driven by many factors, including the complexity of the bureaucratic assessment process for both marketing authorisation and reimbursement, as well as the slow process of healthcare system development to achieve universal coverage on paper, and in reality.
Manufacturers who continue to pursue the ‘CHN opportunity’ for their latest therapeutic developments, will create a bridge to formal reimbursement a patient assistant Programme (PAP), which represents a genuine effort by the manufacturer to provide patient access to the therapy in question at a significantly reduced cost. Such discounts can come in the form of free goods, discounted goods, and other patient support services meant to ease the administrative and cost-based challenges of initiating a patient on the new therapy. As may be expected, many manufacturers who pursue the PAP, are relegated to remain there in the PAP awaiting a formal reimbursement pathway or policy for many years longer than was expected or is clinically or commercially ideal.
Fortunately, the CHN government in its current form is one that pursues change and improvement in an incremental manner – most notably represented by its famed ‘five-year-plans’. So, a single frame in time would display a dilapidated and somewhat uninspiring environment. But the reality is that CHN’s healthcare coverage system, including the reimbursement of high-value, innovative therapies has been under development for years, and will continue to move ahead towards an ideal.
Beyond all of the rhetoric for universal coverage, and a multitude of provincial-level reimbursement pilot programmes that wafted a spirit of change, the change in one dimension is very real. According to the Word Bank data, the gross national income (GNI) per capita in CHN has been more than doubled to over USD 8k in the past decade alone. With increasing economic empowerment, comes an increase in knowledge and the gradual realisation of the right to healthcare. As this occurs, the government will be eager to attract the availability of the latest clinical breakthroughs from around the world. Crucial to the CHN government will be ensuring that the locally empowered believe they can get the best that the world has to offer right at home – and do not need to bring their skill and knowledge to any other country to achieve this for their families.
In MAR 2018, a major reorganisation of CHN’s healthcare regulatory administration signalled exactly this intent from the government. The CFDA and its procedures was streamlined, while the health insurance authority was empowered with greater authority. Private health insurance is still a minor segment at about five percent of the population, but represents nearly 70 million people choosing to pay more for what is largely supplemental insurance coverage. With the pace of economic development observed in CHN, the size of this segment will likely expand.
When taken in aggregate, these regulatory and economic drivers allow CHN to maintain its place at the head of the emerging markets opportunity for foreign direct investment by the pharmaceutical industry – which includes the prioritisation of the market within the global launch timeline. Hence, understanding the current landscape and factors driving future development scenarios for these launches in CHN will be vital to correctly estimating the true potential of this exciting market.
Access and Reimbursement Pathways
To understand the reimbursement landscape in CHN, a review of the key stakeholders and decision-makers is a necessary first step. Like many emerging markets, CHN has both broad essential public coverage and the availability of supplemental private health insurance for those who can afford such expenditure. While these public and private segments represent unique sets of risks and opportunities, gaining the proximity to engage with them requires first the CFDA’s marketing authorisation.
With the most recent National People’s Congress, President Xi Jinping ushered in significant reforms of how new therapies are assessed and authorised for marketing in CHN. Starting at the top, there are now three key stakeholders in the approval process. The new NHC (National Health Commission) will oversee all policy guidance for regulatory and reimbursement agencies to improve healthcare services. Under the NHC lies the SMRA (State Market Regulatory Administration, 国家市场监督管理总局), with the broad mandate to oversee therapy safety, quality, and even intellectual property rights. Finally, the most directly involved is the SDA (State Drug Administration, 国家药品监督管理局, and formerly known as the CFDA), which recently dropped “Food” from its name and responsibilities to focus specifically on drugs and medical devices. As is evident from this structure, even the first step of marketing authorisation involves stakeholders with arguably overlapping responsibilities that will likely be refined as the new system is put into practice. To ensure that the system functions as intended – to accelerate review timelines – the most vital change is the elimination of the previously debilitating mandate for local trial data to be submitted for any new therapy entering CHN. This change, alone, will reduce overall timeline estimates and should push CHN earlier in the queue of global launch priorities for the manufacturers of major clinical breakthroughs.
Additionally, the SDA’s new powers will include a new fast-track approval process that should shorten the actual review process from 18 to six months. Additionally, the SDA has published a list of 48 therapies already approved by the FDA (Food and Drug Administration), the EMA (European Medicines Agency), and / or the PMDA (Pharmaceutical and Medical Devices Agency) but not the SDA – and which would be granted priority review if the therapy can submit evidence of equivalent performance in a CHN patient population as in the evidence that formed the basis of approval by the other regulatory agencies.
Ultimately, the ability to achieve funding of a new therapy is one of the most significant factors influencing the relative priority of any market within the global context. CHN’s decision to consolidate the NRDL update process, price negotiation, and oversight of the social insurance mechanism within the SMIA (State Medical Insurance Administration, 国家医疗保障局) represents a major step forward for the country. At the same time, such consolidation of power can create some uneasiness at the negotiation table, as the SMIA knows full well that they can simply walk away from manufacturers who refuse to “play Mahjong”. With a highly visible and powerful role within healthcare in CHN, the SMIA will be eager to demonstrate value for the system – hence, difficult negotiations are likely to continue, but partners who are willing to play ‘nice’ and by the rules, are likely to gain long term benefit within the context of a growing market and vital relationship.
Outside the national reimbursement process are also the 32 provincial / autonomous region / municipality governments. Each subnational government has its own PRDL (Provincial Reimbursement Drug List), creating the opportunity for pilot access programs in affluent regions (e.g., Guangdong, Zhejiang) in advance of pursuing or accomplishing national reimbursement via the SMIA. As has long been the case, early access at the provincial level can be a critical stepping stone to national consideration.
While the government sponsored insurance is certainly the largest opportunity, the healthcare policymakers in CHN are aware its limitations. Awareness and adoption of private health insurance has been rising rapidly in CHN, and the essentials found within the NRDL and local PRDLs are unlikely to satisfy increasingly savvy and economically empowered healthcare consumers. As seen in many countries, the media’s role is also noteworthy and causing ripple effects in access and pricing policy in CHN. The public is keenly aware of the access issue in part due to a recent film Dying to Survive, which tells a familiar story of desperate patients and their families who are unable to afford the therapy they need to treat cancer. As a result, these patients and their families would smuggle generic options from uncertain sources in IND (India), rather than await the uncertainty of public reimbursement. The CHN government responded rapidly, eliminating all import tariffs on oncology therapies, and offering incentives for people to purchase supplemental coverage in the private market. A substantial expansion of private health insurance as a means of coverage, especially among the economic elite and emerging elite is expected over the coming five years driven by a variety of factors, including these top-down policies and the awareness of available local options and the growing knowledge of the importance of such supplemental coverage.
Challenges & Opportunities
To better understand these various reimbursement opportunities and challenges, a case example can be explored involving HERCEPTIN™(trastuzumab, $ROG) (see FIGURE 1). A breakthrough in breast cancer treatment, HERCEPTIN™ was approved in the USA in 1998. Over a decade later, HERCEPTIN™ became available in CHN in AUG 2011 – but even then, it was through a PAP. $ROG partnered with the CFC (Cancer Foundation of China) to organise the PAP in order to temporarily overseas come affordability challenges for a patient population almost entirely incapable of affording the out-of-pocket payment necessary for access to this potentially life-saving therapy. For patients who completed the first six cycles of HERCEPTIN™, $ROG then donated the next eight cycles through the CFC. Effectively this led to over 50% discounting every 14 cycles – and still, these relatively more fortunate patients were only a fraction of the full patient population in need of HERCEPTIN™.
The next step in coverage was through private health insurers, though even here it was only partial. Private health insurance in CHN takes many forms, but most often it is not a fully-insured model observed in many other countries. Instead, the traditional premium or single-payment model will help cover the patient cost-sharing requirements for publicly reimbursed therapies.
By 2016, HERCEPTIN™ had taken the next major step in access in the CHN market: provincial reimbursement. PRDL access can vary greatly, with HERCEPTIN™ achieving access in Jiangsu, Zhejiang, Guangdong, Guangxi, Ningxia, and Hunan. These agreements represent a major leap in coverage across the country, but still with significant patient cost-sharing requirements, which can range from 20-40%.
The ultimate step in the HERCEPTIN™ journey to access in CHN occurred in 2017. Following lengthy negotiations, HERCEPTIN™ was listed for national reimbursement at what appears to be approximately a 65% price discount at the national level. While this was certainly a breakthrough for Chinese breast cancer patients, this same product lost exclusivity three years prior in the EU and is expected to lose exclusivity in the USA in 2019. For future innovative products, the hope is that such significant lag times will not persist as these stages of access attainment faces pressure to accelerate, expand, and demonstrate results for the Chinese people.
FIGURE 1: Various methods have been used in CHN to improve treatment affordability; most newly launched innovative therapies are still in the PAP waiting room.
For innovative therapies, access to the CHN market is a major challenge – but it is without doubt one of the most exciting and rapidly evolving in the world. Domestic demand for the latest in healthcare will continue to boom, driving pressure for additional reforms that increase the opportunity for reimbursement of valuable therapeutics. To compete in CHN, manufacturers must closely monitor policy reforms, the reality of their implementation, and the new approaches undertaken by the ever competitive landscape in this fascinating market.
CBPartners continues to study and advise clients on the CHN marketplace. Beyond this post itself, the firm will be following-up with additional commentary on the CHN environment that will include greater detail on the opportunities of the private health insurance market as well as some risk-sharing agreements and pilots with unique designs customised to fit the CHN landscape.
If you are interested in learning more about CBPartners’ expertise in this area, we are pleased to share that we will be conducting a workshop at the upcoming ISPOR Asia Pacific: Risk Sharing for Early Access to Innovation in China. Please join us this Monday, September 10th, at the Keio Plaza Hotel (Nishiki Room), from 5:00pm-6:00pm to participate in this workshop. We hope to see you there!