Agreement Between China National Insurance System And Drug Firms Yields Big Price Cuts In Exchange For Market Access

The latest round of negotiations between the Chinese government and pharmaceutical firms has yielded massive price cuts for consumers in the country on more than 65 new brand-name drugs in return for access to the second-largest pharmaceutical market in the world.

The price cuts average more than 60% and were agreed to by pharmaceutical firms in exchange for the inclusion of their products on China’s National Reimbursement Drug List (NRDL) in 2022. Drugs on the list are covered by China’s national health insurance system, which generally reimburses between 50% – 70% of their cost to consumers. But to be included on the list, manufacturers must agree to low prices set by the Chinese government.

The process allows the Chinese government to cherry-pick drugs and slash drug prices in exchange for reimbursement status. But pharmaceutical manufacturers have generally benefitted when their products are included on the list because the significant price cuts they agree to are counterbalanced by the potential size of the Chinese medical market.

Among the multinational firms benefiting from the recent negotiations are Johnson & Johnson, which will have four new drugs on the 2022 list, including Darzalex, a treatment for multiple myeloma, and Pfizer, which will have three. The price for Chinese consumers of Spinraza, a new drug from Biogen to treat spinal muscular atrophy, is expected to plunge as a result of the negotiations, as is that of Taltz, a psoriasis drug from Eli Lilly & Co., among others.

The NRDL was established in 2000 and until 2017 reimbursed mainly generic drugs. But since then,  annual updates have increasingly included more premium, innovative therapies, leading to bigger sales at lower prices in China for the Western drug firms who produce such drugs.

Written by: Ames Gross – President and Founder, Pacific Bridge Medical (PBM)
Mr. Gross founded PBM in 1988 and has helped hundreds of medical companies with regulatory and business development issues in Asia. He is recognized nationally and internationally as a leader in the Asian medical markets. Mr. Gross has a BA degree, Phi Beta Kappa, from the University of Pennsylvania and an MBA from Columbia University.