What Makes Pricing Innovative Drugs So Challenging? How to Solve the Payment Dilemma? (AI Translation)
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文｜财新周刊 周信达 滑昂
By Caixin Weekly's Zhou Xinda, Hua Ang
中国创新药行业起步虽晚，但随着国家医保谈判规则日趋成熟，一批国产新药在医保内和医保外两大市场均实现降价，惠及更多患者。过去“灵魂砍价”极大提高了患者用药的可及性，但也不可避免冲击到企业创新研发的利润回报，影响投入动力。
Although China's innovative pharmaceutical industry had a late start, as the national health insurance negotiation rules have matured, a number of domestic new drugs have seen price reductions in both the insured and uninsured markets, benefiting more patients. The past practice of "soul bargaining" has significantly improved the accessibility of medication for patients but has inevitably impacted the profit returns on corporate innovation and research and development, affecting investment motivation.
另一方面，受到包括国内药品降价及相同治疗领域“内卷”加剧等因素影响，“中美双报”逐渐成为药企开发创新项目的标配。无论是新兴的生物科技企业，抑或向创新转型的传统药企，都不得不为产品“出海”尽早铺路。
On the other hand, influenced by factors including domestic drug price reductions and intensified competition within the same therapeutic areas, dual reporting in both China and the United States has gradually become a standard practice for pharmaceutical companies developing innovative projects. Whether it's emerging biotech firms or traditional pharmaceutical companies transitioning to innovation, they are compelled to pave the way for their products' international expansion as early as possible.
2019年底，百济神州（688235.SH；06160.HK；NASDAQ：BGNE）的泽布替尼（商品名：百悦泽）代表中国抗癌药首次敲开美国市场大门后，在2023年已经跻身“10亿美元分子”行列。传奇生物（NASDAQ：LEGN）的CAR-T疗法产品西达基奥仑赛（商品名：CARVYKTI）也在2023年实现全球销售额5亿美元。
By the end of 2019, BeiGene (688235.SH; 06160.HK; NASDAQ: BGNE) with its cancer drug Zanubrutinib (brand name: Brukinsa) made a historic entry into the U.S. market as the first Chinese anti-cancer medication to do so. By 2023, it has joined the ranks of drugs generating over $1 billion in sales. In the same year, Legend Biotech (NASDAQ: LEGN) achieved global sales of $500 million for its CAR-T therapy product Cilta-cel (brand name: CARVYKTI).
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- China's pharmaceutical industry has seen domestic new drugs benefit from price reductions due to mature national health insurance negotiation rules, but this has impacted corporate profits and investment in innovation. Dual reporting in China and the U.S. is becoming standard for companies developing innovative projects, with BeiGene's Zanubrutinib and Legend Biotech's Cilta-cel achieving significant sales in international markets.
- The National Healthcare Security Administration issued a draft aiming to encourage high-quality innovation by establishing a pricing mechanism for newly listed chemical drugs, requiring companies to submit a self-assessment form before declaring listing prices. This approach aims to prioritize genuine innovation and guide enterprises towards focusing on clinical value in drug development.
- Concerns exist about the impact of domestic drug price reductions on global pricing systems and the motivation for continued investment in innovation. The "Draft for Solicitation of Opinions" proposes quantitative rules for pricing innovative drugs, emphasizing clinical value but faces criticism regarding its potential interference with market economy principles and the autonomy of pharmaceutical companies in setting drug prices.
China's pharmaceutical industry has made significant strides in innovation, with domestic companies increasingly focusing on developing new drugs. The national health insurance negotiation rules have matured, leading to price reductions for many domestically produced drugs, which has benefited patients but also impacted corporate profits and investment in research and development [para. 1]. This situation has prompted pharmaceutical companies to seek international expansion, particularly in the United States, where drug prices are significantly higher than in China [para. 1].
BeiGene's cancer drug Zanubrutinib and Legend Biotech's CAR-T therapy Cilta-cel are examples of successful international commercialization by Chinese companies, with Zanubrutinib generating over $1 billion in sales by 2023 [para. 2]. However, the significant pricing difference between domestic and international markets poses challenges for establishing a global pricing system that ensures reasonable profits for companies [para. 2].
The "2024 Global R&D Trends Report" by IQVIA highlights China's position as a major player in pharmaceutical research and development. Yet, the lack of matching payment incentive policies leads to most clinical trials being conducted only within China, and a third of new drugs are sold exclusively domestically after launch [para. 3]. This scenario underscores the need for improvement in the valuation of innovative drugs and pricing mechanisms.
In response to these challenges, the National Healthcare Security Administration issued a draft titled "Notice on Establishing a Pricing Mechanism for Newly Listed Chemical Drugs to Encourage High-Quality Innovation" [para. 4]. This draft aims to optimize the pricing mechanism from the listing process by requiring companies to submit self-assessment forms that include pharmacological basis, clinical value, and evidence-based proof before declaring their listing prices. Drugs assessed as highly innovative will enjoy policy incentives such as accelerated listing acceptance processes and guidance for priority procurement by public hospitals [para. 4].
Despite these efforts, concerns remain about the scientific validity of self-determined quantitative evaluation indicators and whether administrative management restricts enterprises' pricing rights. The complexity of setting drug prices is exacerbated by health insurance departments controlling access prices through negotiation tactics [para. 5].
The international expansion of China's domestically produced innovative drugs has seen significant activity, with cross-border licensing projects totaling over $45 billion throughout 2023 [para. 6]. BeiGene's Zanubrutinib achieved annual sales of $1.29 billion after more than four years on the market, highlighting its success as a "blockbuster" drug primarily in the U.S. market [para. 6]. Despite this success, there is little difference between China and the United States regarding drug evaluation and approval for Zebutinib; however, there is a stark contrast in pricing between the two markets [para. 7].
Other Chinese-developed innovative drugs have also made their way to the U.S., including Junshi Biosciences' Toripalimab and Hutchison China MediTech's Fruquintinib. These cases illustrate that markets in developed countries offer higher profit margins compared to domestic markets [para. 8].
The disparity in drug pricing between domestic and international markets raises questions about how Chinese pharmaceutical companies can maintain a global pricing framework while entering medical insurance systems at reduced prices. Industry insiders suggest that establishing China as a global "low-lying area" for drug prices places innovative drugs at a disadvantage when undergoing pricing evaluations abroad [para. 9].
Efforts are underway to address these challenges through reforms such as allowing new biopharmaceutical products to reference international pricing of similar drugs and supporting plans led by the National Development and Reform Commission for innovative drugs throughout their entire chain [para. 10]. These initiatives aim to provide clearer expectations for research and development returns while balancing reasonable profits for companies with affordability for patients.
Ultimately, optimizing rules around medical insurance access based on respect for market principles will be crucial in ensuring that high-value innovative drugs can achieve both corporate returns and patient accessibility.
- BeiGene
贝达药业 - Summary： Based on the article, BeiGene is a Chinese pharmaceutical company that has achieved significant milestones in the development and commercialization of innovative drugs. Key points about BeiGene include:- In 2019, BeiGene's cancer drug Zanubrutinib (brand name: Brukinsa) became the first Chinese anti-cancer medication to be approved for sale in the U.S. market.- By 2023, Zanubrutinib achieved annual sales of $1.29 billion, with over 70% of sales coming from the U.S. market.- Zanubrutinib has been approved in over 65 markets globally, including China, the U.S., and the EU, with the U.S. being its largest market.- The retail price of Zanubrutinib in the U.S. is about 11 times higher than in China, highlighting the significant price difference between the two markets.- Zanubrutinib's success in the U.S. market has made it one of the most successful cases of commercialization overseas for domestically produced innovative drugs from China.In summary, BeiGene's Zanubrutinib serves as a pioneering example of a domestically developed innovative drug achieving commercial success in the U.S. market, despite the significant price differential between China and the U.S.
- Legend Biotech
传奇生物 - Summary： Legend Biotech, as mentioned in the article, is a pharmaceutical company that has achieved significant success in the global market with its innovative CAR-T therapy product, Cilta-cel (brand name: CARVYKTI). By 2023, the company had reached global sales of $500 million for this product, marking a notable milestone in the commercialization of domestically produced innovative drugs.
- Junshi Biosciences
君实生物 - Summary： Junshi Biosciences, a Chinese pharmaceutical company, has achieved notable success in the development and commercialization of innovative drugs. In 2019, its PD-1 inhibitor toripalimab (trade name: Tuoyi) received approval from the U.S. Food and Drug Administration (FDA) for the treatment of nasopharyngeal carcinoma. The company's toripalimab achieved significant sales in the U.S. market, with a wholesale acquisition cost of $8,892.03 per vial (240mg*6mL). In contrast, the same specification of toripalimab was priced at 1,912.96 yuan in China, which is significantly lower than the U.S. price. This significant price difference highlights the challenges faced by Chinese pharmaceutical companies in achieving reasonable returns on their innovative drugs in the domestic market.
- Hutchison China MediTech
和黄医药 - Summary： Based on the article, Hutchison China MediTech's Fruquintinib received FDA approval on November 9, 2023, for the treatment of third-line colorectal cancer. Within 48 hours of its approval, under the promotion of its partner Takeda Pharmaceutical Company, the first prescription was issued. The wholesale purchase price for a box of Fruquintinib (5mg*21 tablets) is $25,200. In China, the listed price for Fruquintinib at 5mg*7 pills was previously found to be RMB 2,513.70.
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