China speeds cancer drug price cuts amid outcry over smuggled Indian generics

Get ready, cancer drug makers. China is eyeing speedier price cuts on oncology drugs, thanks to an outcry over a movie that publicized smugglers sneaking cheaper generics into the country. And the drugs targeted for cuts are mostly Big Pharma therapies.

The country’s newly formed, all-powerful health insurance administration aims to deepen discounts on cancer drugs already on its National Reimbursement Drug List (NRDL). The effort would use public bidding and procurement specifically centered on cancer therapies. Meanwhile, officials will start enlistment negotiations for treatments not yet included on the coverage list, according to the state-run China Central Television.

A new focus on cancer costs was announced during a government press conference in late April, right before the country removed import tariffs and reduced import value-added tax to 3% on all cancer therapies. The government hopes drugmakers will factor in those favorable tax moves when pitching prices on their therapies.

Last year, China forced two rounds of NRDL negotiations after seven years of stasis. More than a dozen cancer drugs, including AstraZeneca’s Iressa and Roche’s Herceptin, are now covered by the country’s insurance program, but only after the companies agreed to huge discounts—a typical move trading lower prices for higher volume. Demand for Herceptin, for example, surged after the discount, triggered a national shortage.

Now, because of the Chinese regulator’s streamlined drug review process, new and more effective cancer treatments like AstraZeneca’s Tagrisso and Bristol-Myers Squibb’s Opdivo are entering the market at unprecedented speed. That, in turn, has pushed the government to negotiate prices more often and make therapies accessible to patients more quickly.

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Beijing’s recent declaration came as a dark comedy movie—"Dying to Survive"—that touched off nationwide debate on cancer drugs’ high prices. The film is based on the true story of Lu Yong, a leukemia patient who smuggles a cheap Indian-made Gleevec copycat not approved in China. The film raked in $200 million in four days at the Chinese box office, and sparked a public outcry, not to mention demands for lower prices on life-saving cancer drugs.

But getting drug prices as low as possible, or following India’s looser generics policies, isn’t the way forward for China, at least according to one researcher.

In an interview with China’s business news outlet Jiemian, Zhu Hengpeng, a Chinese healthcare reform expert who heads the Center for Public Policy Research at the Chinese Academy of Social Sciences, warned that pushing drug prices too low could hurt innovation in the long run, for domestic drugmakers in particular. He argued that global firms—usually first to market—have the financial power to cope with lower prices in China, thanks to revenues they collect in Western countries before their products go off patent. However, burgeoning domestic firms must rely on a relatively higher price to make up for R&D costs, he said.

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Public bidding that pits manufacturers of the same type of drug against each other might not be the biggest threat for multinational drug developers, at least for now, because many treatments still lack competition in China. But local firms are catching up, and the Chinese government has already put through policies that support generics. For instance, the country has adopted generic names, instead of brand names, in all healthcare settings, and launched tax incentives for high-quality generics makers.

What’s more, in an effort to contain insurance spending, China is piloting reimbursements based on indications instead of services. Under that program, hospitals would be given a fixed payment for each patient treated for a particular disease. With their own finances at stake, doctors would have less incentive to use high-cost drugs.