Shanlian Hu, MD, MSc, Professor of Health Economics, School of Public Health, Fudan University, Shanghai, China
The price negotiation of the national medical insurance drugs has attracted much attention. Recently in China, the National Healthcare Security Administration has adjusted and improved “The Rules for Negotiating Drug Renewal”. The medical insurance price negotiation system has become more scientific, standardized, and refined to a higher level. There is still a lot of potential for strategic value-based procurement.
Optimally Balance Overall Risk
The World Health Organization believes that determining the price of a country's drugs is related to the following aspects: 1) International external reference pricing, 2) Domestic internal reference pricing, 3) Cost-plus pricing, 4) Value-based pricing, 5) Transparency of markup rules in drug supply and marketing, 6) Promoting the application of high-quality generic drugs and biosimilars, 7) Implementing volume-based procurement, 8) Exemption or reducing drug taxes.
In 2020, the United States had the highest annual total health expenditure as a share of GDP among Organization for Economic and Co-operation and Development (OECD) countries, at 19.5% followed by Canada, Germany, France and the United Kingdom, accounting for 13.4%, 12.8%, 12.5% and 12.4% respectively. In the Asia-Pacific region, Japan, Australia and South Korea accounted for 10.9%, 10.6% and 8.8% respectively. The total health expenditure in China accounts for 7% of GDP in 2022 compared to 6.7% in 2021. In addition, statistical data showed that the proportion of personal health expenditure in total health expenditure continued to decline to 27.0% in 2022. China has continued to increase its expenditure on health. In addition, the Chinese government continues to increase health expenditure and social health insurance expenditure year after year.
Currently social medical insurance has gradually shifted from passive purchasing to strategic procurement procedure thereby obtaining lower-cost, more reasonable and valuable health services, including the choice of medicines and quality of medical services. Improving the performance of medical insurance funds and purchasing with volume-based prices and the quality with value-based healthcare are systematic improved, the trend of optimization relies on the efficiency of medical insurance resources and the overall capacity of risk balance.
Putting Patients First
In recent years, the medical insurance authority has always supported medicine innovation by shortening the negotiation cycle, improving the evaluation process mechanism, and accelerating the launch lags of drugs. At the same time, putting patients first and adhering to value-based procurement through the purchasing monopsony power and the market competition mechanism determine the price of drugs. By doing so, it will significantly improve the cost-effectiveness of newly approved drugs and make them worth buying every penny.
With the implementation of multiple activities, such as negotiation on access to medical insurance drug reimbursement list and centralized volume-based procurement, more and more new drugs are included in the list at appropriate prices. According to statistics, since 2018, the number of eight batches of national procurement drugs has reached 333, and the average price of centralized procurement has been reduced by more than 50%, saving a cumulative cost about 300 billion yuan. The policies of tendering and negotiation have played an important role in this process. The common principle to regulate drug prices is through encouraging market competition mechanisms, which is commonly used in many countries. According to the World Health Organization report (2020), tendering is any formal and competitive procurement procedure through which tenders are requested, received and evaluated for the procurement of medicines and vaccines, and as a consequence of which an award is made to the tenderer whose tender is the advantageous.
Negotiation refers to discussions aimed at reaching an agreement with potential suppliers. In addition to acceptable general terms and conditions, the outcome of tendering and negotiation might include specific price reductions through discounts and rebates. Meanwhile, negotiations are discussions aimed at reaching an agreement among potential suppliers. The outcome of tenders and negotiations may include reductions in drug prices, including discounts and rebates. Negotiations are often used to establish terms and conditions between the negotiating parties regarding various aspects of the procurement, such as price, quality, risk, timing of payment, etc.
Accelerating Accessibility through Inclusion in Health Insurance
Although medical insurance does not have a responsibility for directly promoting the research and development of the pharmaceutical industry, national medical insurance negotiations can fully reflect value-oriented medical insurance strategic purchasing. The demand for medical insurance drugs plays an important role in supporting drug innovation and encouraging competition. For example, medical insurance will focus on the treatment of major diseases (such as tumors, cardiovascular diseases, chronic diseases, etc.), drugs in shortage, pediatric medications, and priority of innovative drugs.
Any drug included in the medical insurance reimbursement list means that it has a broad market. The authors have used a PDB hospital database to analyze the drug growth rate of 17 oncology drugs negotiated in 2018. In three-year period from 2019 to 2021, the analysis showed that their sales growth rate of 11 negotiated drugs (Axitinib, Isazzomib, Osimertinib, Afatinib, Pezopanib, Regorafenib, Ceritinib, Vemotinib, Anlotinib, Ibrutinib, Azacitidine) all increased by more than 200% after three years of renewal contract. Calculation based on the expansion of market size, the growth rate also shows the same pattern. Among them, the growth rates of Isazzomib, Regorafenib, Ceritinib and Azacitidine have even exceeded 2000%.
Taking Anlotinib as an example, the price was reduced by 45% during price negotiation in 2018, and the market size was close to 3 billion yuan (RMB) when the contract was renewed in 2020 and 2021, and the price was further reduced by 37% and 4.5%, respectively. The price of Cetuximab was reduced by 70% after the first negotiation in 2018, and the market size had reached 1.2 billion ~ 1.5 billion yuan (RMB) when the contract was renewed in the next two times, and the price was reduced by 7% and 3.3%, respectively.
Future Trends
The high-quality of medical insurance development has ensured in turn the high-quality development of the pharmaceutical industry, which will guide the innovation of China’s innovative drug research. According to the "2022 National Medical Security Development Statistical Report " released by the National Healthcare Security Administration, the cumulative balance of the basic medical insurance fund in 2022 was 4.26 billion yuan. Despite imbalances of revenue and expenditure in a few regions, there is still a significant potential for value-driven strategic procurement.
The original article can be accessed here:
https://mp.weixin.qq.com/s/UN5-YEAddnyWIdRBdFnOIA