context: Despite impressive growth, domestic pharma innovation suffers from high homogeneity. The transition to original innovation may arrive in time given the ever-improving regulatory environment. More pressing is how to pay for expensive innovative drugs. BMI seems unable to ‘offset R&D sunk costs’ while other channels are underdeveloped. Incentives to pursue costly innovation could also diminish.
Positive changes in the sales and regulatory environment have pushed domestic pharma innovation to grow from being the barren field it was a decade ago, reports Caixin and 21 Century Business Herald. The average approval time has decreased from 115 to 15 days. In 2020, National Medical Products Administration approved
- 76 new drugs
- 37 imported
- 12 TCM (traditional Chinese medicine)
- a record number of 27 domestic innovatives
- seven domestic vaccines
- three for COVID-19
The number of domestic innovative drugs and the level of cutting-edge technology are catching up with developed nations, writes Chen Yi 陈怡 Tsinghua University Hospital Management Research Institute professor. Domestic innovation will continue to grow but still faces challenges in originality and payment.
A weak foundation in basic research hinders original innovation. Lacking the capacity to study new drug targets, firms crowd their resources into a few known areas like anti-cancer drugs. Yet the more concentrated they are in the same fields, the fiercer competition drives their prices lower in BMI (Basic medical Insurance) reimbursable drug negotiations. Ultimately, firms could lose incentives without high returns considering the high R&D failure rate, long R&D cycles and high levels of capital and tech investment.
Currently, BMI remains the sole payer but the negotiation mechanism is not yet mature. While drugs are approved and covered by BMI faster than ever, this also brings uncertainty in clinical and cost-effectiveness which cannot be fully proven by clinical trial data. Chen suggests
- temporary coverage by BMI reimbursement conditioned on future results of real-world studies
- developing non-state payment channels
- balancing price control and incentives for market competition
- more state support and funding in basic research and R&D