Former CFDA Head Bi Jingquan: Challenges and Solutions in China's Innovative Medicine Market
Bi Jingquan, previously at the helm of the China Food and Drug Administration and instrumental in regulatory overhauls that transformed China's innovative pharmaceutical sector, currently serves as the Deputy Director of the Economic Committee of the Chinese People's Political Consultative Conference and the Executive Vice Chairman at the China Center for International Economic Exchanges.
His insights into China's innovative drug market are often piercing, drawn from his rich experience and profound knowledge of the field. These were shared in his keynote speeches at the Chinese Pharmaceutical Enterprise Management Association's China Pharmaceutical Science and Technology Forum in December and at the Health Industry Session of the China Development Forum 2024 Annual Meeting in Beijing on March 24, 2023.
Challenges
In discussing the challenges facing China's innovative medicine market, Bi cited factors such as global market shifts, intense local competition, and the lingering effects of past developmental bubbles. However, he points out that the most pressing issues are the profound impact of national reimbursement negotiations and the arduous task of securing listings for negotiated drugs in hospital formularies. These barriers, if not addressed promptly, could significantly impede the growth of China's innovative medicine market.
Bi Jingquan notes that many new drugs are excluded from the national reimbursement list because they fail to meet the reimbursement authority's price demands. Those drugs that successfully negotiated their prices between 2021 and 2023 experienced an average price reduction exceeding 60%.
Bi Jingquan also describes China's unique drug distribution model, where 90% of medications are distributed through hospitals and village clinics, in contrast to other countries where drugs are primarily sold in retail pharmacies. This distinctive distribution model presents unique challenges for the innovative medicines market. Introducing new drugs becomes an uphill battle without inclusion in the national reimbursement catalog.
As reported by IQVIA at the end of 2022, only about 10% of the nation's 3,300 tertiary hospitals have purchased innovative drugs listed in the national reimbursement drug list (NRDL) in the past five years, with only 5.4% doing so in 2021. The 2023 data suggests an even more challenging situation.
Solutions
Bi proposes three strategies to tackle these challenges:
(1) Market-driven pricing for innovative drugs: He advocates setting drug prices through global market competition to ensure predictability and attract investment.
Companies choose projects based on research and development potential, while investors decide where to invest based on risk and expected returns. Market forces typically determine the feasibility of these valuations. However, if external factors influence this assessment, unpredictability ensues. This unpredictability indicates inherent risk, compelling capital to shift away from high-risk markets towards those offering lower risk.
(2) Strengthening commercial health insurance: Bi argues that China's current basic medical insurance system is built on the foundation of the generic drug industry. Its fundamental objective is to provide "basic, low-level, widespread coverage." Currently, all medical insurance funds are dedicated to covering drugs and services listed in the current reimbursement catalog, leaving little room for the widespread adoption of innovative medicines.
Furthermore, medical insurance funds face pressure to streamline medical service pricing, address challenges related to early detection, prevention, treatment, and management of chronic diseases, and manage the consequences of longer life expectancy and a growing elderly population, among other factors.
Consequently, vigorously developing commercial health insurance, establishing a multi-tiered healthcare security system, and opening up new payment channels for innovative drugs are imperative.
Bi points out that to foster the growth of commercial health insurance, it's crucial to establish clear parameters for basic medical insurance coverage and precisely delineate what constitutes "basic protection." This clarification will pave the way for expanding commercial health insurance offerings. Additionally, it is imperative to make basic medical insurance data available to assist commercial insurance product development, enact commercial health insurance laws, and reform the insurance management system to integrate basic and commercial health insurance.
(3) Reforming public hospitals: To facilitate access to innovative drugs in hospitals, Bi suggests lifting restrictions on the number of drugs public hospitals can include in their formularies, removing the "one brand two specifications" policy, and drug proportion control.
Bi further argues that hospitals' practice of selling drugs at zero margins contradicts fundamental economic principles. To incentivize hospitals to invest in and distribute innovative drugs, he suggests allowing a reasonable markup on the sale of such medications to cover related administrative expenses incurred by the hospital.
Lastly, Bi states that medical service price overhaul holds the key to reforming the system of "medicines supplementing medical treatment." Currently, there is excessive waste and over-medication in the medical sector. By rationalizing medical service prices, we can address these issues without increasing the overall social burden of medical expenses. As long as medical service prices remain reasonable and doctors can earn a decent income through medical services, they will inevitably establish private clinics outside of hospitals.
References:
- 毕井泉：要高度重视生物医药产业的困难和挑战，对生物医药创新给予全链条的支持, E药经理人, 2024-01-01, https://mp.weixin.qq.com/s/bLcqnYpbq_0sM7SNvhCx4Q
- 毕井泉：营造最具竞争力生态环境 共迎创新药蓬勃发展春天, 经济参考报, 2024.03.26, http://www.phirda.com/artilce_34552.html?cId=1&module=trackingCodeGenerator
