Drugmakers gain more access to China, but at a price
Drugs approved at record pace, but firms left to slash prices to gain insurance coverage
China is approving foreign drugs at a record pace, opening the door to its lucrative market for the world’s leading pharmaceutical companies, while also extracting big discounts.
Regulators have greenlighted dozens of outside drugs for use in China over the past 21 months, some within a few weeks. The approvals follow a series of policy moves by China to provide its 1.4 billion people access to new, lifesaving drugs, especially those that treat cancer. New Jersey-based Merck & Co. received the most approvals—eight—out of the 30 innovative foreign drugs approved by China’s drug regulator through September this year, according to consulting firm McKinsey & Co. The regulator is on track this year to match or even surpass the 40 innovative foreign drug approvals it granted last year, the most in any single year for at least a decade. In 2016, China approved three such foreign drugs.
Selling these cutting-edge treatments in China creates an attractive opportunity for foreign companies, which currently supply less than a quarter of drugs by value to Chinese hospitals, the biggest buyers of pharmaceuticals in the world’s second-largest drug market, according to health data company IQVIA.
Optimism is measured among the big drug companies, however, because many have slashed prices so that China’s government insurance will cover the costs of some of the newly approved treatments. And so far, only one out of seven foreign drugs approved since the start of last year has been added to the list of treatments partially covered by China’s public insurance program, leaving numerous drugs beyond the financial reach of many patients.
Western companies also need to make up for an expected drop in China sales for their older, patent-expired drugs as Beijing pushes domestic manufacturers to boost the quality of cheaper copies, known as generics, and take over more of the lower-end mass market.
A series of moves by Beijing since 2016 include an attempt to shed its slow drug-approvals process that has hampered the fight against serious diseases in a country which has a patchy state-run health-care system and where only a sliver of society can afford the best health care.
Last year, China began accepting global clinical trial data, among other things, helping foreign companies save time and money by bypassing separate tests on Chinese patients that were earlier needed to process approvals. A year earlier, China instituted priority reviews to fast-track drugs that meet certain criteria, such as targeting children or rare diseases.
One of the medicines that could receive priority approval this year is an experimental anemia drug called roxadustat, according to the U.K.’s AstraZeneca PLC and San Franciscobased FibroGen Inc., which codeveloped it. If granted, it would mark the first time a new drug from a multinational gets the go-ahead in China ahead of the U.S., where the companies plan to seek approval next year.
Earlier, “China was a bit of an afterthought,” said Mark Mallon, head of AstraZeneca’s global product strategy. Now, every drug that goes into late-stage testing must have a China plan, he said.
China makes up 19% of AstraZeneca’s sales, and growth has accelerated so far this year. Chief Executive Pascal Soriot said in a July earnings call that he expected China to eventually overtake Europe as the company’s second-largest market.
Merck’s approvals include its HPV vaccine Gardasil 9, which Chinese regulators took nine days to green light—the fastest drug approval in years—as well as its blockbuster cancer treatment Keytruda, which unleashes the immune system’s ability to attack cancer.
The company is now leveraging rules allowing global clinical-trial data to seek an additional approval for Keytruda so it can prescribed in combination with chemotherapy.
“China is much more aligned now with what we see in other parts of the world that support innovation,” said Adam Schechter, the president of global human health at Merck.
Other American companies to receive drug approvals this year include Johnson & Johnson, Gilead Sciences Inc., BristolMyers Squibb and Pfizer Inc.
Switzerland’s Novartis AG has received approvals for nine new drugs since the start of last year. It also has benefited from the regulator’s focus on making drugs available to children, gaining additional approval for two of its drugs to be used in children, inside just three months.
Drugmakers are looking to tap China’s more affluent urban class, who can afford private insurance or pay out-of-pocket for treatments. Many of these new treatments can cost hundreds, or sometimes thousands, of dollars.
Another boost can come from Chinese authorities agreeing to reimburse costs under the state health-care system. China offered encouragement by revising its reimbursements list last year for the first time in eight years, then updated it again this year to partially cover 10 out of the 70 foreign drugs approved since the start of 2017.
In return, the Chinese government demanded deep discounts on the price of drugs it reimbursed. That led multinationals to slash the price of the 10 treatments covered this year by an average of 54%, according to McKinsey.
AstraZeneca offered the largest discount, 71%, on the price of its lung-cancer drug, Tagrisso, approved last year. Japan’s Takeda Pharmaceutical Co. Ltd. cut the price of its multiple myeloma drug, Ninlaro, by 46%. Ninlaro’s approval this April was a surprise in itself. Japan’s largest drugmaker by sales hadn’t expected approval before mid-next year. An AstraZeneca spokeswoman said the discount was offset by the increased number of patients that Tagrisso can treat, adding that the drug treats a form of lung cancer that is twice as common among Asians than it is in Caucasians. A Takeda spokesman said it originally priced Ninlaro on par with what it charges in Japan but budgeted for a reduction to make the reimbursement list.
While at least 90% of China’s population is estimated to hold some form of public insurance, some drugs aren’t fully covered and remain out of reach for many Chinese patients.
“Access to new treatments is broadening,” said Franck Le Deu, a senior partner at McKinsey who consults health-care companies on China, “but it is not broadening fast enough.”