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Innovent's drug inclusion in reimbursement list intensifies PD-1 race in China

China added Innovent Biologics Inc.'s cancer medicine Tyvyt to the national drug reimbursement list, raising expectations that more PD-1 drugs will be included in future installments of the list, analysts said.

The inclusion is also set to further intensify price competition among drugmakers offering immuno-oncology drugs in China, the world's second-largest pharmaceuticals market.

The drug list names therapies that will be reimbursed by state-sponsored insurance plans. Inclusion in the list requires drugmakers to slash prices of their products after negotiations with regulatory authorities in exchange for greater access to hospitals. What they lose in price, they can potentially gain through higher sales volume, according to analysts.

Tyvyt, co-developed with Eli Lilly and Co., belongs to a class of cancer drugs known as PD-1 checkpoint inhibitors, and is the first in its class to be included in the reimbursement list revised Nov. 28 — a development healthcare experts have been anticipating for some time now.

PD-1 drugs aim to treat cancer by enhancing the body's immune system through blocking the interactions between cancer cells and T-cells. These medicines can be used to treat various kinds of cancer.

Tyvyt's addition to the list is a test case for PD-1 drugs and the price and sales volume dynamics are likely to inform future negotiation strategies between the Chinese government and companies, a Nov. 29 note by SVB Leerink said.

Tyvyt's price was cut by 63.7% to 2,843 yuan per vial from 7,838 yuan per vial for patients with hard-to-treat classic Hodgkin lymphoma, a type of blood cancer, according to the National Healthcare Security Administration's website.

"It paves the way for market access, which is especially important for companies that do not have a strong marketing and sales force," Shanghai-based Huajing Securities analyst Zhao Bing said.

However, Hodgkin lymphoma is less common in China, as opposed to other forms of cancer, such as that of the lung and liver, according to analysts.

Some analysts believe if Tyvyt generates strong sales volume, PD-1 drugs that treat cancers more prevalent in China could be added to the reimbursement list in future iterations.

There are five PD-1 drugs in the Chinese market — Tyvyt, Shanghai Junshi Biosciences Co. Ltd.'s Tuo Yi, Merck & Co. Inc. Keytruda, Bristol-Myers Squibb Co.'s Opdivo and Jiangsu Hengrui Medicine Co. Ltd.'s camrelizumab.

"If this strategy proves successful for Innovent in Hodgkin lymphoma, once a Chinese PD-1 is approved in lung cancer, as early as 2021, we expect that they will employ this low price strategy again," SVB Leerink said in the note.

Almost all the Chinese drugmakers are testing their PD-1 treatments for indications such as lung and liver cancer, while Merck's and Bristol-Myers' therapies are already used to treat lung cancer in China.

Fierce fight

SNL ImageThe latest revision added
70 new drugs to the reimbursement list.

Source: iStock

The latest revision placed 70 new drugs on the reimbursement list with an average price cut of about 60.7%, according to the National Healthcare Security Administration. Among the 70, 22 are novel cancer therapies, including AstraZeneca PLC's Lynparza.

With Tyvyt slashing prices, Keytruda will become the most expensive PD-1 drug in China, priced at 305,000 yuan a year after discounts under patient assistance programs, followed by 220,000 yuan for Opdivo, 119,000 yuan for camrelizumab and 94,000 yuan for Tuo Yi for a group of patients with specific characteristics, according to a Dec. 1 report by Citigroup.

The annual cost for Tyvyt, meanwhile, will be around 97,000 yuan after the price cut, the report said.

With the price gap widening between PD-1 treatments, patients will prefer the more affordable versions, Cyrus Ng, a Hong Kong-based healthcare analyst at Jefferies, said.

Huajing Securities' analyst Zhao also believes it will intensify the ongoing price war in PD-1 drugs in China.

Innovent said in a statement that patients with Hodgkin lymphoma will be fully or partially reimbursed for the 2,843 yuan vial, depending on provincial rules, while other cancer patients will need to pay the same price in full.

Meanwhile, both Merck and Bristol-Myers remain optimistic about marketing their PD-1 therapies in China, while confirming they participated in pricing negotiations for the drug list, they said in separate emails to Market Intelligence.

A Merck spokesperson said in an email the company welcomes the opportunity to continue discussions with the Chinese government if invited to negotiate for a future listing. Bristol-Myers also said in a statement that it will continue working with the Chinese government, payers and third-party organizations to improve Opdivo's accessibility in China.

It is possible that Merck and Bristol-Myers were unwilling to accept steep price cuts on their medicines, which would have widened the already existing price gap for both blockbusters sold in China and the rest of the world, Zhao said.

However, Tyvyt's inclusion sends the message that regulators will consider including advanced treatments in the reimbursement list, he said.

SNL Image

As of Dec. 6, US$1 was equivalent to about 7.04 yuan.