5 policies in 2019 will affect China's pharmaceutical market in 2020, which mainly involve China's national medical insurance payment and pharmaceutical product cost control.

1. Learning the Sanming Model for medical reform

The State Council of China issued the Notice on Further Promoting the Experience of Fujian Province and Sanming City in Deepening the Reform of Medical and Health System on Nov. 15, 2019 to make clear the further promotion of the medical reform experience of Fujian Province and its Sanming City in China.

According to the document, the scope of varieties subject to the procurement with target quantity organized by China will be expanded in 2020; pharmaceutical products not included in the procurement with target quantity organized by China shall be subject to the procurement with target quantity or budget by the end of Sep. 2020, and the centralized procurement of valuable medical consumables by category shall be explored; the monitoring mechanism for key pharmaceutical products shall be comprehensively established by the end of Dec. 2020.

Comment: We can see from the above that the end-point monitoring management of pharmaceutical products and consumables and the reform of the payment side will be the focuses in 2020.

2. Centralized procurement of pharmaceutical products to be gradually settled by China's national medical insurance

The Leading Group for Deepening Reform of the Medical and Health Care System of the State Council Issuing the Notice on Several Policy Measures for Further Deepening Reform of the Medical and Health Care System by Breaking Through the Centralized Procurement and Use of Pharmaceutical Products (GYG Fa [2019] No. 3) was issued on Nov. 29, 2019.

The official document for the second batch of procurement with target quantity has been released, which is required to be completed by the Chinese New Year in 2020. It seems that China's national medical insurance department doesn't want the industry to enjoy the new year.

Besides implementing the results of the procurement with target quantity required by China, provinces in China shall also act on the pharmaceutical products not included in the procurement scope of China. According to the document, "national medical insurance handling agencies are encouraged to directly settle the pharmaceutical product payments with the pharmaceutical producers or circulation enterprises" and "relying on the provincial centralized procurement platform of pharmaceutical products, construct a unified open public procurement market of pharmaceutical products in China, and unify the codes, standards, and functional specifications, to advance the interconnection of related information such as pharmaceutical product prices and resource sharing and promote the linkage of pharmaceutical product prices in the country".

Comment: The frame of the centralized procurement platform of pharmaceutical products has been gradually set up in China, and the identity of China's national medical insurance as the biggest payer is also gradually established.

3. New Drug Administration Law

The newly revised Drug Administration Law of the People's Republic of China was adopted by the 12th meeting of the Standing Committee of the 13th National People's Congress of the People's Republic of China by vote on Aug. 26, 2019 and has come into force on Dec. 1, 2019.

This revision is a comprehensive revision of the Drug Administration Law by China after 18 years. The new Drug Administration Law is divided into General Provisions, Pharmaceutical Development and Registration, Pharmaceutical Marketing Authorization Holders, Pharmaceutical Production, Pharmaceutical Distribution, Medical Institutions' Management of Pharmaceutical Affairs, Post-marketing Pharmaceutical Management, Pharmaceutical Prices and Advertising, Pharmaceutical Reserves and Supply, Supervision and Administration, Legal Liability, and Supplementary Provisions, with a total of 155 articles in 12 chapters.

The supporting Provisions for Drug Registration was sought for comments in 2019 for twice, and whether the final document will be released on the last day of 2019 or the first working day of 2020 is worth expecting. The registration classification and the dynamic management after the cancellation of the GMP certification are the highlights and also the difficulties.

Comment: The Drug Administration Law will comprehensively advance the pharmaceutical Marketing Authorization Holders system, however, many of the current regulations conflict with other regulations, and those conflicts need to be solved one by one.

4. NRDL and NRDL negotiations

The high-profile adjustments of the national reimbursement drug list (NRDL) of China in 2019 were also completed based on the Work Program for the Adjustments of the National Reimbursement Drug List in 2019 issued on Apr. 17, 2019. Drugs are included in the list by conventional access and negotiation access. Those included by conventional access are safe, effective and relatively cheaper varieties, while those included by negotiation access are exclusive, patented and relatively more expensive varieties. The new NRDL eventually includes 2,643 pharmaceutical products, with 148 varieties newly added and 150 varieties removed. The adjustments of the NRDL this time were the first comprehensive adjustments after the establishment of the National Healthcare Security Administration of China and attached equal importance to Chinese and western medicines.

The new round of NRDL negotiations was kicked off in Beijing on Nov. 11, 2019. And the National Healthcare Security Administration of China held a press conference at 10 a.m., Nov. 28, 2019 to introduce the related situation of the NRDL negotiations in 2019. The National Healthcare Security Administration and Ministry of Human Resources and Social Security of China Issuing the List of Drugs Included in the National Reimbursement Drug List by Negotiation Access in 2019 was thereafter released on the official website of the National Healthcare Security Administration of China.

Comment: Drugs in the list under key monitoring will be removed from the NRDL; once the generic drugs of products in the negotiated NRDL are marketed, such products may be adjusted to the conventional NRDL; and the model of winning bids by price competition is adopted for the same indications in the NRDL negotiations. All the above show the ability of the National Healthcare Security Administration of China to "force prices down" and its administration of the drug list of each hospital from the perspective of the NRDL.

5. Will the consistency evaluation of injections be started in 2020?

The consistency evaluation of generic drugs is a focus of the industry, and the technical standards for the consistency evaluation of injections are being sought for comments, however, the official document has not been released to date.

Comment: The current policy of procurement with target quantity is not friendly to varieties with more than three manufacturers. For injections that are not high-end ones, it's very difficult to form technical thresholds to reduce the number of manufacturers, therefore, the later the technical standards for the consistency evaluation of injections are introduced, the better for enterprises. Healthcare supply companies that want to obtain short-term markets for high-priced products can consider applying for marketing through the channel of new registration classes.

Summary

It is the best of times and it is the worst of times. We can see that China's national medical insurance will have the absolute advantages in price negotiations after becoming the biggest payer. Pharmaceutical enterprises need to consider the perspective of the medical insurance besides the market competition and they need to have the cost control awareness no matter for the new drugs or innovative drugs so that their business can last long.

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