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China to start negotiations on drug reimbursement; PD-1 drugs likely to be in

Chinese regulators will start negotiating with pharmaceutical companies to add new medicines to the national drug reimbursement list, according to the National Healthcare Security Administration.

The regulators said they will prioritize adding drugs for cancer, chronic diseases, rare diseases and other severe and acute illnesses to the list. Patients only pay a portion of the price for the drugs on the list.

Chinese regulators in October 2018 added 17 anti-cancer drugs to the list, slashing the prices of the drugs by an average of 57%. The adjustments to the reimbursement list will become routine going forward, Zhang Jialin, a Hong Kong-based China healthcare analyst with ICBC International, said in an email. He noted that the negotiation process this year is more transparent than previous years.

"The direction of the negotiations this year will be pretty much the same as last year," said Kay Mai, a Shenzhen-based analyst at Chinese securities firm Guotai Junan International, adding that the price cuts will also likely be as deep as in 2018.

Mai said she also foresees that PD-1 drugs will be included in the list, as the annual cost for domestic PD-1 drugs is already as low as about 100,000 yuan per person when taking into account the patient assistance program, through which manufacturers give the drugs for free after a certain amount are purchased.

"The competition for these checkpoint inhibitors is fierce enough now, and their prices are already close to the level that the reimbursement list can accept," she said. Shanghai Junshi Biosciences Co. Ltd. and Innovent Biologics Inc. both told S&P Global Market intelligence that they will participate in the negotiations to put their PD-1 drugs on the list.

Mai said domestic Chinese drugmakers' products are becoming more competitive for inclusion on the reimbursement list, such as Hutchison China MediTech Ltd.'s cancer drug Elunate, or fruquintinib. Mai does not have a rating on Chi-Med.

The National Health Security Administration said in February that it has an accumulated fund of 2.32 trillion yuan for health insurance as of 2018, and that 1.34 billion people are enrolled in the national health insurance plan as of 2018, which makes them entitled to benefits including drug reimbursement.

Zhang said the regulators are cutting subsidies on generics and controlling subsidies for drugs with less clinical value. The funds saved from these measures, he said, will be used to help pay for more expensive drugs.

Zhang estimates that the regulators can save about 150 billion yuan from cutting subsidies on generics, which will make room to reimburse cancer drugs.

The regulators will review the drug candidates in April and May, and shortlist them for negotiations in June. Then they will unveil the drugs selected for inclusion in August.

As of March 13, US$1 was equivalent to about 6.71 Chinese yuan.