Advancements in China's BMI Payment Policies for High-Value Medical Consumables: How MedTech Should Prepare

High-value medical consumables play a pivotal role in over 95% of diagnostic and therapeutic procedures in Chinese healthcare settings. They contribute a substantial 15%-20% to the total revenue of major comprehensive medical institutions in China, a percentage that continues to rise each year.

Additionally, the market for high-value medical consumables, which are frequently updated and enhanced, is experiencing rapid expansion with an annual growth rate of 26%. This growth significantly outpaces China’s national GDP increase of 5% and the 15% annual rise in healthcare expenses, underscoring the urgency for effective payment strategies to control this expansion.

Given this context, it's unsurprising that China, despite lacking a national strategy to regulate basic medical insurance payments for medical devices, has been taking proactive steps since 2019. These steps involve implementing policies to establish a cohesive national framework for the pricing and reimbursement of high-value medical consumables, necessitating forward-thinking preparedness from MedTech firms.

2019: Definitions and Pricing Framework for High-Value Medical Consumables

In 2019, the General Office of the State Council issued the 'Notice on the Reform Plan for Managing High-Value Medical Consumables' (hereafter referred to as 'the Plan'). This document aimed to streamline the pricing structure of high-value medical consumables and suggested future management would involve access control and the creation of a dynamically adjusted catalog.

For the first time, 'the Plan' explicitly defined high-value medical consumables as products that directly interact with the human body, require high safety standards, are frequently utilized in clinical settings, are relatively expensive, and represent a significant financial burden on the public. This definition highlights not only the high costs associated with these items but also their substantial therapeutic importance and increased risk profile.

Additionally, it is important to note that initially, these consumables' 'three highs' characteristics (high clinical value, high cost, and high risk) were linked by 'and.' However, after the adoption of volume-based procurement (VBP), this linkage changed to 'or.'

2020: Introduction of Catalog-Based Access Management by the National Healthcare Security Administration (NHSA)

In 2020, the NHSA released the 'Interim Measures for the Management of Medical Consumables under Basic Medical Insurance (Draft for Comments).' This document proposed the creation of a 'Catalog of Medical Consumables under Basic Medical Insurance' using an access-based method. This method takes into account several factors, such as the functional roles, clinical value, and cost of the medical consumables, as well as the affordability of the medical insurance fund. The catalog aims to be routinely updated and dynamically adjusted, focusing on the gradual refinement of payment standards for medical insurance.

2021-2023: Implementing Catalog-Based Access Management for Medical Consumables Under Basic Medical Insurance

In November 2021, the National Healthcare Security Administration introduced the 'Interim Measures for the Management of Medical Consumables Payment under Basic Medical Insurance (Draft for Comments)'. This guideline proposed using a universal naming system to regulate national payments for medical consumables and subjected these payments to access management, detailing the scope, standards, and methods of payment.

On May 19, 2023, the Administration issued a draft titled 'Notice on Proper Management of Medical Consumables Payment under Basic Medical Insurance,' emphasizing the need for more standardized classifications and efficient payment processes. It highlighted the necessity to stabilize payment scopes while shifting towards management by generic names and aligning with reforms that separate charges for technical labor from material costs.

Subsequently, on September 5, 2023, the Administration published the 'Notice on Proper Management of Medical Consumables Payment under Basic Medical Insurance,' setting forth finalized directives.

The developments from 2021 to 2023 highlight several significant themes in the management of medical consumables payments.

#1 Advance the national standardization of classifications and codes for medical consumables while gradually introducing management based on generic names for medical insurance.

Historically, managing medical consumables has been challenging due to inconsistent naming practices. The presence of issues like 'same name, different items' and 'same item, different names' has complicated the identification and differentiation of medical consumables, leading to significant variances in medical insurance payment scopes and criteria across regions in China and resulting in broad, imprecise management approaches.

Since 2019, the National Healthcare Security Administration has employed medical insurance codes for medical consumables, greatly enhancing the accuracy and regulation of their identification. Building on this system of unique codes for each item, further developments are underway to integrate device generic names into the medical insurance payment management system, utilizing real-world big data for establishing comprehensive naming standards.

#2 Separating medical consumable payments with technical labor, following medical service pricing reform.

Payments for medical consumables under medical insurance will adhere to the 'separation of technical labor and consumable costs' principle, aligning with medical service pricing reform. In accordance with this principle, medical insurance will incrementally bring disposable medical consumables, which are currently not included in the pricing of medical service items, under basic medical insurance payment management.

#3 Establish and dynamically adjust the medical consumables insurance catalog. Explore negotiation access for sole-source high-value medical consumables.

Historically, most regions in China broadly classified medical consumables based on department of use and cost, qualifying all items within these categories for reimbursement. This approach often resulted in misusing cost-ineffective medical consumables that nonetheless secured high reimbursement rates.

The 2023 Notices introduce a shift from this broad classification to a precise catalog-based management system. This new approach focuses on incorporating items selected through volume-based procurement while exploring negotiation access for sole-source, high-value medical consumables.

The Notices also advise on the dynamic adjustment of the catalog, taking into account technological progress, clinical usage, cost of medical consumables, and the financial realities of the insurance funds and beneficiaries. This aims to ensure the catalog remains relevant, effective, and financially sustainable by facilitating timely additions and deletions.

#4 Establish payment guidelines for medical consumables: defining scope, standards, and methods.

Payment Scope:

• Medical consumables that are sole-sourced and pass the review will enter into negotiations for potential inclusion in the 'Medical Consumables Catalog' based on the outcomes of those negotiations.
• Multi-sourced products will be directly included following standard procedures.
• Products that should be excluded from the catalog include non-therapeutic rehabilitation devices, consumables of low clinical value, and those with questionable pricing integrity.
• Products should be removed from the catalog if they pose significant safety and economic risks, have their registrations or approvals revoked by regulatory authorities, or are placed on negative lists after expert review.

Payment Standards:

• Initial payment rates for sole-sourced products under new generic names will typically be established through negotiations.
• For consumables selected in volume-based procurement, payment standards should align with the winning bid prices.
• Payment standards for non-selected products must not surpass the highest price of similar, selected items.
• A uniform payment standard could be applied to consumables with identical functions, uses, materials, and clinically interchangeable features.

Payment Methods:

• Integrate payments for medical consumables with DRG/DIP reforms.
• Specific payment methods for medical insurance consumables should generally be decided by provincial healthcare security administrations or within risk-pooling regions.
• Local areas are encouraged to include catalog-listed medical consumables in bundled payment arrangements.

#5 Develop a unified provincial medical consumables catalog during the "14th Five-Year Plan" Period (2021-2025).

The 2023 'Notices' emphasize that, throughout the '14th Five-Year Plan' period, a unified provincial (including autonomous regions and municipalities) medical consumables catalog under basic medical insurance should be established using the access method.

Regions that already possess a province-wide unified medical insurance catalog for medical consumables should progressively transition to management by generic names, starting from the existing national medical insurance classifications and codes. Those areas lacking such a unified catalog are encouraged to prioritize their development within the timeframe of the '14th Five-Year Plan.'

Furthermore, for consumable categories where management by generic names is established, the national government plans to gradually formulate a unified national medical insurance catalog and systematically broaden the scope of consumable categories included in this national catalog.

How MedTech Should Prepare

For innovative medical device companies, the lifecycle of products prior to VBP has drastically reduced. It has become critically important for these companies to capitalize on the timing to enhance the market launch and adoption of new products and therapies.

These 'Notices' collectively set out the future management of medical consumables under basic medical insurance schemes, aligning closely with the governing framework for the current Basic Medical Insurance Drug Catalog.

Consequently, medical device companies should remain vigilant regarding any new measures and policies from Chinese reimbursement authorities concerning the pricing of innovative products and should adapt their strategies accordingly.

Additionally, looking back at the history of pharmaceutical reform, medical insurance negotiations also went through a local pilot stage before expanding nationwide. As such, some local policies should be a near-term focus. These include (1) exempting innovative products from DRG/DIP bundled payments, (2) streamlining the coding of medical consumables and the application process for new medical service price items, and (3) developing reimbursement mechanisms for medical consumables.

Finally, cost containment will remain a pivotal focus of China's basic medical insurance funds in light of slower GDP growth. This highlights the need to explore alternative financing mechanisms, such as commercial health insurance, to enhance the affordability of high-value innovative medical devices.

References:

1. 国家医保局发文，医用耗材支付管理将带来哪些改变？, 2023-9-5, China Medical Insurance Magazine, https://mp.weixin.qq.com/s?__biz=MjM5ODQ4MjU4MQ==&mid=2651330362&idx=1&sn=763b6a649e3eae14a1ffd957d7474c56&chksm=bd36b0c08a4139d6941fca7ca7f77468ea8b7546932b77beec8e60b6fcc949a5fed2e2dde9ab&scene=21
2. 从国内经验看医疗器械医保支付前路, 2023-7-11, China Medical Insurance Magazine, http://www.phirda.com/artilce_32016.html?cId=4
3. 思考 | 高值医用耗材精细化管理的4个关键点, 2023-7-6, China Medical Insurance Magazine, http://www.phirda.com/artilce_31969.html?cId=4