Drugmakers halve their prices to gain access to China market

WASHINGTON • Drugmakers from AstraZeneca and GlaxoSmithKline to BeiGene have agreed to cut prices on some of their newest drugs in China by an average of 51 per cent in order to be covered by the country's insurance fund.

A total of 119 new therapies - treating ailments from pulmonary diseases and diabetes to cancers and lupus - have been added for coverage by the state-run medical safety net after negotiations, the National Healthcare Security Administration said on its website last Monday.

The average price cut is 10 percentage points less than last year, a relief to both domestic and foreign drugmakers that have seen their profits eroded by Beijing's push to drive down healthcare costs.

Companies are eager to get their treatments on the list, even at steep discounts, to gain access to the world's second-biggest market for pharmaceuticals.

Patients in China will need to pay for only a small fraction of the cost of these drugs out of their own pocket as the lion's share of the bill will be footed by China's 2.44 trillion yuan (S$493 billion) national medical insurance fund, which covers more than 95 per cent of the country's 1.4 billion people.

The list of medicines covered by the fund has been updated annually with new entries since 2017, when Beijing accelerated its campaign to bring new drugs to its growing middle class as quickly and cheaply as possible.

In total, Chinese patients can now draw on state insurance to pay for 2,800 medicines. Beijing also managed to slash prices by over 40 per cent on average for 14 drugs whose annual sales exceed 1 billion yuan each. The new version of the drug-reimbursement list will be effective from March 1.

The drugs on the latest list include AstraZeneca's cancer therapy Zoladex. Brukinsa, the first cancer treatment from China to receive US Food and Drug Administration approval, and developed by Beijing-based BeiGene, was also added.

Glaxo drugs Benlysta and Volibris, which treat lupus and high-blood pressure in the lungs, respectively, also made the list.

Other top-of-the-line therapies from multinationals were a diabetes drug from Novo Nordisk, a medicine for chronic obstructive pulmonary disease developed by Astra, and an ulcerative colitis therapy by Takeda Pharmaceutical.

The latest inclusions feature popular immune cancer therapies known as PD-1 inhibitors, cancer treatments that use the body's immune system to fight tumours - a priority for Beijing given that China has around four million new cancer patients annually.

Number of drugs Chinese patients can draw on state insurance to pay for, with 119 new therapies to be added for coverage by the 2.44 trillion yuan (S$493 billion) national fund.

Drop in percentage points of the average price cut drugmakers have to make this year versus last year.

Price slash that Chinese drugmaker Simcere Pharmaceutical Group said it had agreed to for its newly approved stroke therapy to get it on the reimbursement list.

Included are treatments developed by local companies BeiGene, Jiangsu Hengrui Medicine and Shanghai Junshi Biosciences.

The list also highlights treatments for Covid-19 such as the antivirals ribavirin and arbidol, although China has largely contained coronavirus flare-ups after the outbreak a year ago in Wuhan that sparked the pandemic.

It is unclear how deep a cut each company consented to for individual therapies. The National Healthcare Security Administration in the past has reached agreements with some drugmakers to withhold details of the price cuts. Those missing from the new list include Merck & Co and Bristol-Myers Squibb's best-selling cancer therapies Keytruda and Opdivo.

For foreign drugmakers, the competition in China has involved significant sacrifices. New drugs are often brought to the Chinese market at prices lower than they are sold in the West, but still face competition from a growing legion of Chinese biotech firms developing similar medicines that can be sold more cheaply.

The process can be painful for local companies as well. Chinese drugmaker Simcere Pharmaceutical Group said it had agreed to slash the price of its newly approved stroke therapy by almost 70 per cent to get it on the reimbursement list, figuring expanded access would fuel sales. Green Valley Pharmaceuticals, based in Shanghai, said it had taken part in price negotiations for its Alzheimer's disease drug but did not obtain reimbursement status.

Global pharmaceutical companies' older drugs that have gone off-patent are also facing price cuts. In a separate national campaign in which China's public hospitals bulk-buy generic medication, prices have been driven down by as much as 90 per cent.

BLOOMBERG