The 2023 National Health Insurance Administration's medical insurance drug price negotiation work has come to an end, and the public is looking forward to the announcement of the results in December 2023 as well as the adjustment of the 2023 drug reimbursement list for basic medical insurance and maternity insurance in China. What are the highlights and experiences of the medical insurance drug price negotiations in the first six years? What will be the trends of the next national drug price negotiation? Addressing these hot issues, Hu Shanlian, an expert in medical insurance research and professor at the School of Public Health of Fudan University, gave an exclusive interview to Frontier Observation of Pharmaceutical Economic News.

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Pharmaceutical Economic News: What role did the National Healthcare Security Administration (NHSA) play in the previous drug price negotiations?

Hu Shanlian: Through six consecutive years of medical insurance drug price negotiations, the NHSA has played the role of "buyer" of new drugs declared by pharmaceutical companies, and medical insurance negotiations have embodied the roles of "strategic purchasing" and "value-based purchasing".

The price of exclusive products needs to be negotiated to play the role of government intervention, while non-exclusive drugs can be reduced by using market mechanisms and multiple bidding. Medical insurance negotiation is mainly based on the clinical value of the drug, on the basis of a comprehensive scientific evaluation to determine the price that the society is willing to pay and negotiate with the enterprise. Under the market mechanism of "volume for price", the enterprise finally determines the negotiated price under the premise of not exceeding the affordability of the medical insurance fund and the insureds.

The NHSA should do its best and do what it can to support drug innovation based on the premise of "guarantee of basic medical insurance” and "benefiting patients." The improvement on drug coverage should be based on the financial sustainability of China's medical insurance fund. My understanding is that the role of government in drug negotiation is first to solve the problem of the tripartite affordability of drug prices, that is, the NHSA focuses on solving the problem of affordability of medical insurance funds, the patient group is to solve the problem of affordability of the out-of-pocket part, and pharmaceutical companies is looking for a final negotiated price that has a certain profit beyond the production cost.

Secondly, from the perspective of values, the medical insurance party carries out value-based negotiation to achieve "value-based purchasing", the patient group hopes that new drugs with more efficacy can be used to treat diseases and achieve the purpose of "value-based medicine" while pharmaceutical companies hope that the negotiated price can continue to support the R&D and reproduction of new drugs, reflecting the effect of "value-based innovation".

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Pharmaceutical Economic News: Pharmaceutical Economic News: The results of the 2023 medical insurance drug price negotiation are about to be announced, what are the highlights of this round of negotiations?

Hu Shanlian: Since 2018, the National Medical Insurance Drug Reimbursement List has realized the normalized adjustment of "one adjustment per year". In September 2023, the National Health Insurance Administration announced that 386 declared drugs that had passed the formal review, with a pass rate of 70% and 57.2% of them being off-list drugs. After review, 168 drugs (about 43.1%) entered the negotiation and bidding process, of which 148 were negotiated drugs and 20 were competitive drugs. The negotiations lasted four days, which was also the largest number of negotiations in previous years. It covers a large number of drugs with new mechanisms and new targets.

Although the adjustment of the medical insurance drug list is still divided into five stages: enterprise submission, formal review, expert review, negotiation and bidding, and inclusion in the national medical insurance drug list of the year, each step has been more scientific and standardized, objective and fair, speeding up and increasing efficiency, democratic consultation, and continuous optimization. Review experts and pharmaceutical companies are also accustomed to following the procedures and requirements of submission, review, confidentiality, and self-discipline. Judging from the market's, the results of the negotiations have made enterprises more cautious about product layout, which in turn has prompted capital investment to be more rational.

Specific to the highlights of this round of negotiations, I think, first, from the perspective of drug evaluation standards, unmet clinical needs are still an important consideration for the medical insurance authority, compared with comparative drugs, drugs can be divided into four categories: breakthrough innovation, improvement, equivalent, and inferior. According to the ICER (incremental cost-effect ratio) standard, it is basically within the range of 0.5~1.5 per capita China’s GDP level, and the annual treatment cost is within 300,000 yuan (RMB). Taking into Patient-centered, basic protection consideration, and a balance is achieved between the inclusion of innovative drugs and the protection of medical insurance funds. In 2023, great achievements have been made in drug price negotiations, and the medical insurance negotiation system is becoming more and more scientific, standardized, and refined. In the future, we will explore prices around the drug life cycle, and vigorously support valuable and high-quality innovative drugs.

We calculated the proportion of those drugs which passed the formal review to the final negotiation success, which was in the range of 25%~35% (see Table 2, editor's note).

The flexibility of price reduction adjustment for Class 1 innovative chemical drugs, biological agents and Class 1 and Class 3 proprietary Chinese traditional drugs has been increased, and it is expected to achieve a smaller reduction. Encourage innovation and R&D of pharmaceutical companies.

Second, there are also many highlights in the renewal rules, such as the adjustment rules for drug price reductions, which basically cover the whole life cycle of drugs. When renewing the contract of innovative drugs, renegotiation can be applied. If renewing the contract of Covid-19 drugs, the price may not be reduced if there is an excess consumption on drugs. According to media reports, in terms of negotiation rules, the simplified renewal policy has been optimized and adjusted from three aspects: incorporating into the regular list management, gradient price reduction, and renegotiation. The flexibility of price reduction adjustment for Class 1 chemical drugs, biological agents and Class 1 and Class 3 proprietary Chinese drugs has been increased, and it is expected to achieve a smaller reduction to encourage innovation and R&D of pharmaceutical companies.

Table 1 2019-2023 The Numbers of Submitted Drugs, Pass of Formal Review, Negotiation of Drugs and Successful Negotiation 

(Data Source: National Health Insurance Administration)

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Pharmaceutical Economic News: What is the impact of China's medical insurance negotiations on the price of new drugs?

Hu Shanlian: According to media reports, in the 2023 negotiations, the enterprise side still has two opportunities to quote, and if the price can be within 115% of the reserve price negotiated by the medical insurance party, it will enter the negotiation process between the two parties, and the final agreed price between the two parties must not be higher than the negotiated reserve price of the medical insurance party. During the negotiation, the expert will give some hints of the “envelope price”, and the enterprise side will adjust the price in time according to the prompts.

In addition, at present, the main impact of medical insurance negotiations is the price of innovative drugs in China. For example, although there are four CAR-T drugs in China so far, each with a price in the range of 1 million ~ 1.2 million yuan, there is still no chance to enter the negotiation.

Various PD-1 monoclonal antibodies for expanded indications in China's medical insurance list  have achieved initial results in promoting the "going overseas" of innovative drugs.

For example, BeiGene's tislelizumab, Junshi Biosciences' toripalimab, Hengrui Pharmaceutical's camrelizumab, and Takeda-Chi-Med's fruquintinib have all successfully "gone overseas", and the retail price in the United States is 24~30 times higher than that in China. It can be seen that under the price confidentiality agreement, the negotiated price of the domestic drug does not affect the foreign listing price. Therefore, domestic innovative drugs can still actively explore the international market and realize the benefits of commercialization.

In fact, there are also price negotiations on drugs in foreign countries, but the form of negotiation is different, including the United States, where there are more new drugs on the market. As we all know, the United States has always been free to price drugs, and pharmaceutical companies set their own prices at different times of the new drug life cycle, but the United States will also start drug price negotiations. In 2022, the U.S. enacted the Inflation Reduction Act (IRA), which authorizes and empowers the U.S. Health Insurance Administrator (CMS) to negotiate some Medicare Part D and Part B drugs that have been on the market for more than 8 years. According to the ranking of sales value in 2021-2022, the first batch of 10 drugs has been selected in 2023, and price negotiations will be carried out annually from 2026. Drug price negotiations in the U.S. conduct "retrospective negotiations" on the prices of a small number of drugs after they are marketed, with the aim of reducing the cost of drugs with the highest sales amount in the market and smoothing out the increase in drug costs.

Pharmaceutical Economic News: Do you have any suggestions for the next stage of medical insurance drug price negotiations, and what are the trends of negotiations in 2024?

Shanlian Hu: At the ISPOR (The Professional Society for Health Economics and Outcomes Research) conference in the United States in May 2023, an abstract from the authors of Sichuan University compared 93 indications of 65 anti-tumor drugs that were successfully negotiated during 2016~2021, compared the safety, survival, quality of life, overall treatment response rate and cost of various drug clinical trials, and used regression analysis to compare the relationship between clinical value and cost before and after negotiation. There were 71 randomized controlled trials and 22 single-arm clinical trials. The median treatment cost before and after the negotiation decreased by 80,600 yuan ~ 217,800 yuan (RMB). The aim of the study was to assess whether drug price negotiation has led to a more clinical value bias in pricing. The results showed that longer months of survival for treatment indications supported by randomized clinical trials and higher overall response rates for treatment indications supported by single-arm clinical trials were positively correlated with higher treatment costs before and after negotiation. However, the authors of the study found no evidence to support a greater association between price reduction and clinical value in price reduction in China; This also suggests that we should re-examine the current drug pricing strategy in China, so that limited resources are further inclined to provide patients with treatment drugs with greater clinical benefits, rather than wasting on low-value treatments.

The future trend of national medical insurance price negotiation is still that to support drug innovation, we must take "basic insurance" as the premise, do our best and do what we can. We can expect that the relevant government agencies will continue to improve and establish an economic evaluation system in line with the actual situation in China, and the evaluation method will be "from subjective to objective" and "from qualitative to quantitative", to measure the clinical value, innovation, economy, and fairness of drugs accurately and scientifically.

At the same time, we also need to train and expand the team of experts in drug evaluation and fund calculation in different specialties to meet the development needs of China's pharmaceutical industry and the increasingly important negotiation tasks, and gradually achieve fairness, openness and transparency of review methods and results. In addition, we should also absorb the experience of drug price negotiation in various countries around the world, and develop a negotiation mechanism and method suitable for China's medical insurance drug price setting .