China Public Payer May Limit Innovative Drug Prices

At several recent government meetings in China, there have been discussions on how to price innovative drugs. As of now, the NMPA defines an innovative chemical drug as a drug that has a new compound, increased clinical value, etc. This definition is fairly broad and all encompassing. On the other hand, China’s public insurance payer (the National Basic Medical Insurance Fund) for healthcare and drugs wants to define an innovative drug as an innovative small molecule that has a different therapeutic mode of action and chemical structure that can give patients tailored and new health advantages.  It seems that this is more specific and confined definition than the NMPA’s current innovative drug definition.  Of course, China’s public payer is very concerned about the budget and shortfalls.

In addition, China’s public payer wants to set maximum limits on innovative drug prices.  Accordingly, the public payer wants to cap innovative drug prices at no more than 2.0 times the average annual per capita income in China.  Last year the average annual per capita income in China was about $12,500 USD, so they now want to cap innovative drug prices below 2 times $12,500 or $25,000.  Given this, many domestic and foreign drug companies have criticized the public payer’s plan and stated that such price caps for innovative drugs will hurt their R&D efforts and the development of new innovative drugs.  With a dramatically aging population that wants access to new and innovative drugs in China, this debate will continue.

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.