China drug price pilot signals volume for cost-cuts formula

China National Health and Family Planning Commission's Li Bin

Negotiations to cut the prices of 5 imported or patented drugs in China are progressing under a pilot program that would jibe with wider national insurance coverage to leverage volumes for cost savings.

Li Bin, director of the National Health and Family Planning Commission said at a press conference last week that discounts of as much as half are possible on the 5 therapies under discussion with a handful of drug firms, news site China Topix said.

She did not identify the drugs, but in a note to clients Goldman Sachs analyst Richard Yeh named the five therapies.

The pilot includes hepatitis B therapy Viread (tenofovir) from Gilead Sciences ($GILD); and three NSCLC drugs, Roche's ($RHBBY) Tarceva (erlotinib), AstraZeneca's ($AZN) Iressa (gefitinib); and Conmana (icotinib) from Hangzhou-based Betta Pharmaceuticals Co. Ltd. Also in the pilot is Celgene's ($CELG) Revlimid (lenalidomide), Yeh said.

Emails to the companies were not answered by publication time.

China earlier this year acted to create a combined national basic health insurance system that takes a page from Singapore which in early 2015 moved to offer a form of universal health coverage that formally blended existing private insurance plans with subsidized outpatient care and catastrophic inpatient coverage.

That effort coincides with attempts to better cover chronic care costs in China and expand access to drugs that are now out of reach for many Chinese.

Li, at the press conference, said the pilot identified expensive imported or patented drugs and negotiations are underway. This comes as China is also in talks with Gilead over pricing for Sovaldi (sofosbuvir), a drug that still lacks China FDA approval.

Gilead is also a good example because a Shanghai-based firm, Aurisco, challenged the patent on Viread and won two years ago. That may open up a situation akin to a deal to locally manufacture HIV therapy Tivicay (dolutegravir) that saw GlaxoSmithKline ($GSK), which markets Viread for Gilead in China, move to have its ViiV Healthcare arm work with Shanghai-based Desano Pharmaceuticals.

Earnings in China for the companies named would likely not face an immediate hit, Yeh said in his note, adding that volumes could also rise under insurance.

Pricing and volumes are at the heart of concerns by drugmakers in China, whether multinationals or domestic, as China FDA steps up a push for quality and safety, while also promising to speed up the pace of approvals for innovative drugs.

- here's the story from China Topix