NHSA Proposes Launch Price Framework and Aligns Pricing Policies with Drug Lifecycle
At a recent industry investor conference, Weng Linjia, Deputy Director of the Pharmaceutical Pricing and Tender Procurement Department, National Healthcare Security Administration (NHSA), revealed that the agency is actively exploring a pricing framework that correlates drug prices with different stages of their lifecycle.
He also cited the agency's pricing guidelines for COVID-19 therapeutic drugs as a foundational principle for establishing launch prices.
After China's abrupt reversal of its Zero-COVID policy earlier this year, the nation grappled with a significant imbalance between the supply and demand for COVID-19 therapeutic drugs, particularly those recently approved innovative therapies.
In a bid to enhance access to new COVID drugs, prevent price gouging, and expedite domestic research and development, the NHSA issued the "Guidelines for the Pricing of COVID-19 Therapeutic Drugs" in January 2023.
The COVID-19 therapeutic drug pricing guidelines primarily focused on three key aspects:
- how to set new drug launch prices
- how to improve the accessibility of newly launched innovative drugs
- how to manage drug prices through their entire lifecycle
Free pricing at launch, yet subject to peer review and ongoing price risk management
The COVID-19 therapeutic drug pricing guidelines strike a balance between manufacturers' autonomy in pricing and the oversight provided by peer review and continuous price monitoring.
To have a new drug listed on provincial online procurement platforms, the NHSA mandates companies to disclose information regarding the composition of their drug prices. This encompasses details such as raw material acquisition costs, research and development expense allocation, sales profit percentage, and more. The structure of this information should be in harmony with the drug's pricing.
In addition, each drug listing application must include endorsements from reputable medical institutions and agreement from industry associations regarding the fairness of the launch price determined by the manufacturers.
NHSA will also carry out ongoing price risk monitoring, focusing on price differentials between the company's drug price and comparable treatments already in the market. Minor variations are deemed low risk, leading to a more lenient management approach, and NHSA may even offer temporary coverage for the drug through public insurance schemes.
Conversely, if the company's launch price significantly exceeds that of existing similar treatments, NHSA will adopt a high-risk management approach and issue a price risk warning to healthcare institutions.
Simplify provincial listing processes for procuring new drugs and align them with regulatory submission and approval.
Both generic and innovative drugs must be first listed in China's provincial online procurement platforms before medical institutions can make purchases.
Traditionally, drug procurement listing only occurs after the drug has received regulatory approval. Moreover, companies must navigate a prolonged process to individually list their drugs in each province, adhering to diverse provincial drug listing requirements. This method did not meet the urgent clinical demands for COVID-19 drugs.
Consequently, the pricing guidelines for COVID-19 therapeutic drugs opted for a centralized listing approach that aligns with the company's regulatory submission and approval timeline.
According to the new guidelines, companies can submit applications for procurement listing as soon as the National Medical Products Administration (NMPA) accepts their regulatory submission. Furthermore, companies no longer need to seek individual listings in all 31 provinces. Instead, they can submit a listing application to one of the six designated initial listing provinces or cities.
Upon regulatory approval and a successful listing application, the company's products will be simultaneously accessible across all 31 provinces. This significantly enhances the timely access to newly approved innovative drugs through provincial procurement platforms.
Align pricing policies with the drug lifecycle, emphasizing “accessibility” in the early stage and “affordability” in the mid-stage.
During the investor conference, Weng Linjia disclosed that the NHSA is exploring a pricing framework for pharmaceuticals based on the various stages of a drug's lifecycle.
In the initial phases of market entry, companies experience the need to recover costs quickly through commercial revenues. The NHSA will prioritize the accessibility of these drugs during this stage, allowing for higher prices.
If companies deem it necessary to engage in national negotiations at this point, seeking a balance between volume and price, the NHSA welcomes such initiatives.
As drugs progress from the early stages into the mid-term of their lifecycle, particularly when there are three or more substitutes in the market, the NHSA will pivot its attention towards ensuring the affordability of these drugs. Negotiations and other approaches will be employed to encourage companies to lower drug prices.
Final Thoughts
The pricing guidelines for COVID-19 therapeutic drugs are consequential as they establish a framework to bridge the pricing gap from a drug's initial market entry to its participation in the NRDL negotiations.
The NHSA intends to use this set of guidelines to “strategically guide” launch prices of innovative drugs in the future to balance supply and demand.
The associated requirements for peer reviews imply that manufacturers must thoughtfully consider the selection of the primary research hospital for clinical trials and effectively communicate the differentiated values of their products compared to local standards of care.
Additionally, though the guidelines have notably enhanced the “accessibility” of new drugs upon launch, they may not necessarily have improved their “affordability.” To improve product coverage and reimbursement, companies need to leverage diverse financing mechanisms, such as commercial health insurance and local payment innovations.
In the case of inpatient therapies, careful attention must also be given to overcoming payment limitations associated with DRG/DIP groupings when pricing new products. It's noteworthy that China is still in the early stages of implementing companion policies to address new technology add-on payments under these new payment schemes.
References:
- 国家医疗保障局办公室关于印发《新冠治疗药品价格形成指引（试行）》的通知, NHSA, 2023-1-6, http://www.nhsa.gov.cn/art/2023/1/6/art_104_9993.html
- 《新冠治疗药品价格形成指引（试行）》政策解读, NHSA, 2023-1-6, http://www.nhsa.gov.cn/art/2023/1/6/art_105_9994.html
- 国家医保局：给予新药创新回报，围绕药品生命周期探索完善价格政策链, E药经理人, 2023-11-03 , https://mp.weixin.qq.com/s/h75_Ps9nepXZvOXdJfzf5A
- 创新药突发利好：医保将放宽创新药初期定价, 药闻康策, 2023-11-10, http://www.phirda.com/artilce_33239.html?cId=4
