Health care negotiations: Chinese characteristics "health insurance" cliff!

01 Health care negotiation history and process: the fifth round of progress, has entered the final stage of negotiations On August 17, the National Health Insurance Administration issued the "2020 National Health Insurance Drug Catalog Adjustment Work Programme" and "2020 National Health Insurance Drug Catalog Adjustment Reporting Guide", marking this year's national health insurance drug catalog adjustment work officially started.
this year's drug catalog adjustment is divided into preparation, declaration, expert review, negotiation and bidding, publication of results 5 stages.
September 18, the National Health Insurance Administration issued the "2020 National Health Insurance Drug Catalog Adjustment through formal examination of the list of declared drugs."
November 11, the State Health Insurance Administration issued the "Announcement on the 2020 National Health Insurance Drug Catalog Adjustment Expert Review Results Inquiry", the current expert evaluation phase of the work has been completed, but only the declared enterprises can view the results of the evaluation, the public has not been informed of the results of the evaluation.
the previous document, the expert review will form a new transfer in, direct transfer out, can be transferred out, adjust the scope of payment and other four aspects of the drug recommendations list.
will move on to the negotiation and bidding phases, with directory adjustments to be announced in November-December.
Chart 1: Drug Catalog Adjustment Procedures 2020 Source: Health Insurance Bureau Website, China Health Industry Capital Research Center, Since the first round of national drug price negotiations was launched in 2016, the country has held a round of negotiations every year, this year is the fifth round of health care negotiations.
2016 health care negotiations led by the former National Health Care Administration, since the State Council institutional reform in 2018, the national health care access negotiations by the National Health Insurance Administration to take over.
the first round of negotiations in 2016, the number of varieties has increased to 150 in just four years by 2019, and the number of varieties is expected to continue to increase in the future.
the number of successful negotiations is basically in keeping with the trend of increasing the total number of negotiations, the success rate of the new varieties in 2019 is only 58.8 per cent, significantly lower than the 80-90 per cent success rate of the previous two years.
Chart 2: Historical Negotiations Source: Public Information, China Health Industry Capital Research Center Collating 02 Health Care Negotiating Starting Point: a decline of about 50%, reducing the burden of health care and patients Health care negotiations have been carried out four rounds, the fifth round is under way, will continue in the future.
the first four rounds of negotiations, the average decline of all varieties is about 50%, and the average decline of new varieties in 2019 is more than 60% for the first time.
these drugs to such a large price reduction into health insurance, on the one hand to reduce the burden of health insurance, on the other hand, to a certain extent to alleviate the "expensive to see a doctor" problem.
On the first four rounds of successful health care negotiations, each round has a large number of anti-tumor drugs, in 2018 is only for 18 anti-tumor drugs to carry out negotiations, the 17 varieties selected as high as 11 for the nearly three years approved (with 2018 as a reference time node) of new drugs, are clinically urgently needed and patients with a heavy burden of drug costs varieties.
health care negotiations have actually significantly shortened the time it takes for newly approved varieties to be included, allowing patients to spend less on better medicines in less time! In addition to the new drugs, a significant portion of chronic drug use accounts for a large portion of health insurance spending, including diabetes, cardiovascular and cerebrovascular diseases and mental illness.
It is also worth noting that, in addition to clinically acute tumors and chronic diseases, rare diseases have also been the focus of health insurance negotiations, with two rare disease drug negotiations successful in 2017 (recombinant human coagulation factor VII.a for haemophilia and recombinant human interferon β-1b for multiple sclerosis) and as many as nine successful rare disease medications negotiated in 2019.
addition to easing the financial pressures on patients with rare diseases, the move has also greatly encouraged companies to develop drugs for rare diseases.
Figure 3: Distribution of the therapeutic field of historical negotiations Source: Public information, Zhongkang Industrial Capital Research Center collated 03 price reduction into the health care effect: meet the Chinese characteristics of the "health insurance cliff", price reduction increase It is well known that when the patent protection expires, generic drugs will enter and occupy the market at a lower price, resulting in a significant decline in the sales revenue of the original research drug, this phenomenon is known as the "patent cliff".
, for example, Pfizer's Lipto, whose core patents expired in November 2011, began to see a cliff-edge decline in revenue the next year.
, according to the European Commission, in Europe and the United States, the price of generic drugs after the introduction of the original drug fell by an average of about 40% in two years.
in addition to falling prices, generics are pouring in, market share is being snapped up, and sales are falling in tandem, leading to a sharp drop in sales.
Chart 4: Liputo Business Income Source: Company Annual Report, Zhongkang Industrial Capital Research Center, however, in China, due to the domestic pharmaceutical companies imitation capacity is not good, generic drug quality recognition is not high, there is no obvious patent cliff phenomenon, the original research products after the expiration of the patent is still sold at a high price and occupy the majority of the market share.
china does not have a patent cliff, but there is a "health insurance" cliff! The "health insurance cliff" with Chinese characteristics has the following characteristics: First, the inclusion of health insurance time to reduce the price of the time node rather than the patent expiration date.
From several health insurance negotiating varieties over the years of the winning bid index, after the listing have maintained a more stable sales price, after the health care negotiations, its prices have fallen cliff-edge, the average decline of about 50%.
the price reduction time node is not linked to the patent expiration date, and Thatelli and Aroteni even cut prices sharply through health-care negotiations as soon as they went public.
the "Medicare" cliff has greatly increased the access to innovative drugs, allowing patients to use them at lower prices and earlier.
Chart 5: Details of the winning bid index for several health care negotiating varieties Source: Kaiser System, Zhongkang Industrial Capital Research Center (index calculation method: the average winning bid price before inclusion of health insurance is 100, greater than 100 indicates above average, less than 100 indicates lower than average.
time dimension: 1st for the first year of inclusion in health insurance, pre for the year before inclusion of health insurance)
the emergence of the patent cliff is often accompanied by a drop in the volume of prices, the health insurance cliff is not exactly the same.
, for example, Beda Pharmaceuticals' Ektini, negotiated access to health insurance in 2016, which, while prices fell significantly, resulted in a sharp increase in sales.
sales have nearly tripled in just four years through 2019, and sales growth has been less than that of sales, but has been markedly positive.
price of health insurance has risen, which is one of the most important factors that companies are willing to sacrifice high prices to get into health insurance.
Chart 6: Volume Price Bar Chart Source: Company Annual Report, Zhongkang Industrial Capital Research Center (Index calculation method: to include the pre-health insurance average of 100, greater than 100 means above average, less than 100 means below average.
) From an enterprise's point of view, in addition to the factors of price reduction, there are considerations for their own products.
Take AstraZeneta's Ginistini, whose Patents for Chinese Compounds expired in 2016 and negotiated price cuts to health insurance in 2016, as a disguised extension of protection and gaining a larger market share to mitigate the impact of generic drug listings.
for domestic companies, the inclusion of health insurance helps to stand out from competitors and gain a first-in-the-right advantage, and PD-1 health care negotiations are the most typical example.
the 2019 health care negotiations, four PD-1s are listed, including two imported products, as well as two domestic products from Xinda's Xindilli Andrei and Junshi's Ripley Single Resistance.
Xinda and Junshi are the first batch of innovative enterprises in China, such enterprises have strong research and development capabilities, but in the past no product commercialization experience, if the product can be included in health insurance, market access greatly improved, no doubt greatly make up for the short sales board.
In terms of follow-up revenue from both products, Syndicate's revenue has been significantly listed since the successful 2019 negotiations were incorporated into Medicare, and in the first half of 2020 alone it is close to full-year 2019 revenue, with revenue growth of 177 percent year-on-year even in the event of an outbreak.
, the first domestically listed Terriple single-resistance, has significantly less turnover growth than the Xindili mono-resistance due to its failure to enter health insurance in 2019.
So for companies, in an increasingly competitive situation, the inclusion of health insurance through negotiations will help the product to gain market share among competitors, rapid volume, and can make up for the short-term commercialization of products.
Chart 7: Xindili single resistance and Terripley single resistance operating income Source: Company financial report, China Kang Industrial Capital Research Center finishing Of course, through negotiations into health care can not be "once and for all", the health insurance agreement is only two years, two years later, or directly into the regular health insurance catalog, or face renegotiation, or imitation products approved for listing, facing another Chinese characteristics of the "patent" cliff - with volume procurement.
in general, innovative introduction of new products is Wang Dao! 04 This year: Results are coming soon, stay tuned! According to the list published on the health insurance bureau's website, a total of 751 varieties have passed the formal review this year, of which 728 are outside the catalogue and 23 are in the catalogue.
Chart 8: 2020 National Health Insurance Drug Catalog Adjustment Through Formal Review of Drug Situation Data Source: Health Insurance Bureau website, China Health Industry Capital Research Center Collated According to past experience, the list of eligible 5 varieties, that is, from January 1, 2015 to August 17, 2020 approved for listing of varieties into the health insurance negotiations accounted for more.
foreign companies account for the majority of these varieties, with Novaral, Pfizer, Janssen, and Sanofi leading the way with 8, 7, 6 and 5 through formal reviews, respectively.
Chart 9: Foreign companies through the form of examination of varieties Data sources: Health Insurance Bureau website, Dongguan Securities, Zhongkang Industrial Capital Research Center to organize the number of local enterprises that meet this condition is Hengrui, Zhengda Tianqing and Howson leading.
note that all approved unsealed PD-1 products have passed the formal review.
Chart 10: Local enterprises through the form of examination of variety data sources: health insurance bureau website, Dongguan Securities, Zhongkang Industrial Capital Research Center to sort out which products will go directly into health insurance, which will be through the negotiation process after the inclusion of health insurance? We will continue to pay attention, stay tuned!