China gives Merck, BMS cold shoulder on reimbursement list as PD-1 battle enters new phase

It’s a familiar scene in the race onto China’s national reimbursement list: Drugmakers cut prices by an average 60.7% to win coverage in the world’s second-largest pharmaceutical market.

AbbVie, AstraZeneca, Bayer, Gilead Sciences, Johnson & Johnson, Novartis, Roche and Sanofi are among multinational pharma companies to have reached deals with the Chinese government to include their steeply discounted drugs in the country’s insurance scheme over the next two years. Altogether, 52 Western-style drugs—versus traditional Chinese medicines—have a new place on the NRDL.

Still, the National Healthcare Security Administration’s (NHSA’s) Thursday announcement (Chinese) sent out some new sweet-sorrow signals for key products and drug classes.

Only 1 PD-1 deal

Industry watchers were waiting with bated breath for the negotiation outcome for the PD-1 class. Turns out, only one drug, Tyvyt (sintilimab) from domestic firm Innovent Biologics and partner Eli Lilly, has won coverage after agreeing to slash prices by 64%. Merck & Co.’s Keytruda, Bristol-Myers Squibb’s Opdivo and local firm Junshi Biosciences’ Tuoyi (toripalimab/JS001) failed to cut deals with the Chinese government.

The result will not threaten Merck and BMS—for now—as Tyvyt is only covered for the small indication of relapsed/refractory classical Hodgkin’s lymphoma after at least two lines of chemo. Opdivo boasts approvals in second-line non-small cell lung cancer and head and neck cancer, while Keytruda has first-line NSCLC and advanced melanoma.

Still, as L.E.K. Consulting’s Justin Wang sees it, Tyvyt’s price, not just in its percentage discount but also the absolute amount, will become a key benchmark for fellow PD-1/L1 players “to revisit their pricing and channel strategy in order to stay competitive.” 

The sole inclusion of Innovent's drug “seems to imply that the pricing expectation from NHSA is pretty aggressive and that they fully understand the fierce competition in the market among the products,” Wang told FiercePharma in an email interview.

A team of SVB Leerink analysts also expressed caution over the long-term impact of Tyvyt’s low price, especially for that small a disease ahead of much larger indications like lung cancer; after all, to win wider access, more generous discounts are expected for NRDL. “If this strategy proves successful for Innovent in HL, once a Chinese PD-1 is approved in lung cancer, as early as 2021, we expect that they will employ this low price strategy again,” they said in a Friday note. “The big question now is how much low-priced, local competitors can erode the brand-sensitive cash-pay market.”

It’s widely speculated that Tyvyt went big to secure a head start against Chinese oncology powerhouse Jiangsu Hengrui’s homegrown AiRuiKa (camrelizumab/SHR-1210), which just nabbed a green light in cHL in late May and therefore was not eligible for this round of price talks. And BeiGene’s tislelizumab awaits a decision in cHL as well.

Officially launched on Mar. 9, Tyvyt racked up sales of CNY 331.6 million ($47.1 million) by June 30, Innovent said in its half-year report.

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After patient assistance programs, Hengrui’s med costs about CNY 118,800 ($16,900) a year. With the discount offered to the government, Tyvyt will cost about CNY 96,662 ($13,700) for 51 weeks. In comparison, emboldened by their key NSCLC nods and a mountain of data accrued so far, Opdivo’s price comes in at about twice as much and Keytruda’s exceeds CNY 320,000, both after patient assistance.

In a statement shared with FiercePharma, Merck didn’t give out details of the discussion but said it remains committed to making Keytruda available and accessible to cancer patients in China.

Bristol-Myers Squibb, in its own statement, said it “takes great care to price Opdivo in China based on the value that it brings to patients, health institutions and society, as well as the high-unmet medical needs and the affordability for Chinese patients,” and that it will “continue to collaborate with the Chinese government, payers and third-party organizations through diversified programs to jointly improve the accessibility of Opdivo in China.”

Meanwhile, BeiGene, Innovent, Hengrui and Junshi are all running late-stage NSCLC trials; and AstraZeneca and Roche—two seasoned oncology marketers in China—could soon chalk up approvals for Imfinzi and Tecentriq, respectively.

Cut-throat hepatitis C competition

The pricing pressure on hepatitis C drugs has also spread to China—and it spells trouble for other meds in highly competitive therapeutic areas as well.

According to an NHSA briefing (Chinese), the agency managed to cut the prices of three hep C drugs—Gilead’s Harvoni and pan-genotype therapy Epclusa and Merck’s Zepatier—by a whopping 85% thanks to a new negotiation method.

Ordinarily, prices are settled on a per-drug basis. A drugmaker can propose a price for each drug twice, and the agency’s negotiation experts will only talk further if the offer came no more than 15% above its predetermined, undisclosed threshold.

But for hep C drugs this time, noticing that six direct-acting antivirals can cure the disease with similar efficacy, the agency asked the developers to fight for only two coverage spots. Epclusa somehow opted out of that process and still won listing through the normal track.

Epclusa’s inclusion is a blow to AbbVie, whose pan-genotype therapy Mavyret (called Maviret in China and other ex-U.S. countries) didn’t participate in the talk as it was green-lighted this May. In exchange for the price cuts, NHSA has promised not to include any new hep C drugs over the next two years, effectively depriving AbbVie the opportunity to steal much share during its launch phase.

The Chinese market is not to be sneezed at. The country has about 10 million HCV patients, the largest in the world, with about 200,000 new diagnoses each year, according to the nation’s health department. That kind of a market looks even more important to Mavyret. With competition intensifying in the U.S.—after Gilead launched lower-priced authorized generics—and the patient pool shrinking, Mavyret sales in the third quarter dropped 17% year over year, to $695 million.

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China-first innovations

It’s worth noting that AstraZeneca and FibroGen’s first-in-class anemia drug roxadustat, which last December landed its world-first approval in China, has also won coverage, even ahead of its U.S. green light. Based on that win and a higher-than-expected price, SVB Leerink analyst Geoffrey Porges now projects the drug could hit $1.43 billion in China sales alone by 2025, significantly higher than his team's previous forecast of $670 million.

Another China-first winner is Chi-Med’s Lilly-partnered VEGFR inhibitor Elunate, which last September became the first domestically made medicine to be cleared for a major cancer type.

“China continues to emphasize innovation, and especially innovation from China,” L.E.K.’s Wang said. “It’s not surprising that these products get further attention from the reimbursement authorities.”

Biotech investor and Loncar Investments CEO Brad Loncar also tweeted that Elunate “[r]ightfully should be the type of R&D that is rewarded,” and that its inclusion in NRDL “sends the right message.”

RELATED: Sanofi, AZ, Lilly and more win business in China's expanded cut-price purchase program

Other key winners in this round include AstraZeneca’s PARP inhibitor Lynparza, Roche’s HER2 follow-up Perjeta and ALK+ NSCLC therapy Alecensa, Bayer’s eye drug Eylea, Novartis’ JAK inhibitor Jakavi and heart drug Entresto, and AbbVie’s Humira.

Furthermore, 27 of 31 renegotiated drugs renewed their contracts by offering an average 26.4% discount, NHSA said Thursday. AstraZeneca’s breast cancer drug Faslodex, which already faces generic assault in the U.S., is among the four that got kicked out.