China Issues Draft Document on Innovative Chemical Drug Pricing

On February 5th, China’s National Healthcare Security Administration (NHSA) made public a declaration titled – Establishing a Price Formation Mechanism for newly-listed chemical drugs to encourage high-quality innovation. Basically, the Chinese government acknowledged that in its pricing process, highly innovative and less innovative drugs are priced similarly. Hence, there are few incentives for drug manufacturers to invest in the development of highly innovative drugs.

Going forward, if this initiative is adapted, drug makers will do a self-assessment of their novel chemical drugs with respect to clinical value, innovation, etc. to determine if their drug has high, medium, or low levels of innovation. These ratings will also be guided by NHSA’s ranking criteria. Then, when first listed on drug procurement platforms, drugs with high innovative value will have more influence, without government restriction, on initial pricing. In addition, drugs with high and medium innovation levels will be given 5 years of consistent pricing. Low innovation drugs will need to provide specific reasons to maintain their initial prices. An additional potential advantage of this declaration is that high and medium innovative chemical drugs listed in one province can now use the same pricing in all provinces across China. This streamlines the process and eliminates the need for separate negotiations with each provincial procurement system.

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.

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