China has the second largest healthcare system in the world behind the USA. However historically, this market has been challenging to access for Western manufacturers. Not least since China’s national reimbursed drugs list, the NRDL, favors locally manufactured products and prior to 2017 had not been updated in eight years. However, several recent NRDL updates, the most recent in December 2020, which takes effect from March 2021, have opened the Chinese market to overseas manufacturers, specifically in areas such as oncology and rare diseases.
2020 NRDL key updates:
In 2020, the NRDL went through its fourth update since 2017. A key difference to this most recent update over those carried out in previous years is that manufacturers were able to apply for formal review before negotiations took place. Guidelines for applications were released in August 2020 and saw manufacturers racing to submit before the shortlist was released in October, as shown in the timeline below:
Historically, manufacturers were unable to prepare and submit applications for review, and only products selected by a panel of experts were put forward to price negotiations. This critical change to the process opens the door to manufacturers wishing to access the Chinese market. As a highly budget-driven market, price is the primary decision driver. Experts in charge of short-listing products do consider the clinical data package and whether additional benefit is demonstrated, however during negotiations the primary decision driver will be price vs current standard of care and as a result, heavy discounting is likely to be required.
In addition to allowing manufacturers to submit their products for evaluation, the 2020 update also focused largely on the expansion of oncology products, with one quarter of all 96 drugs added to the NRDL in 2020 being oncolytic. This follows suit with other updates, such as the 2019 update which saw 22 oncology products added to the list. China’s expansion into this disease area is largely down to increasing cancer cases and a rising unmet need resulting from its aging population. In addition to expansions into oncology, recent NRDL updates have also seen an average of 7-8 orphan products added to the list, demonstrating China’s drive towards innovation, and potentially providing exciting opportunities for a number of manufacturers.
However, despite this drive towards innovation, heavy price discounts to the proposed manufacturer list price should still be expected to gain access to the NRDL and pass-through China’s rigorous pricing negotiations. For foreign manufacturers, this could mean losing out to local products which are able to discount their products to a greater degree. Such was the case for Keytruda the PD-1 inhibitor which missed out to the locally produced tislelizumab. Additionally, the average price cut in 2020 rose to 51% compared to 44% in 2017, highlighting that although China is gearing towards expansions in oncology and rare disease, gaining access to the NRDL requires significant discounts which may be too high for some manufacturers to swallow.
Considerations for the future:
Reimbursement for the 96 new products added to the NRDL in 2020 will come into effect this month (March 2021), and with annual updates expected for the foreseeable future, market access opportunities in China are becoming considerably greater, especially for manufacturers in oncology. However, as a highly budget focussed market, heavy price cuts should be expected to gain inclusion, and this may limit the opportunities available for many high-priced overseas products. Manufacturers should therefore consider whether to pursue a reimbursed low pricing strategy to gain access to a sizable Chinese market or to maintain a high-priced non-reimbursed strategy.