The era of drug pricing based on companies &#34;slapping their foreheads&#34; is gone forever.
On April 14, information from multiple national departments indicated that the country is establishing a pricing mechanism for innovative drugs that is primarily market-oriented, with appropriate government regulation and guidance. This document, titled &#34;Several Opinions on Improving the Drug Price Formation Mechanism,&#34; released by the General Office of the State Council, proposes several key policies, including optimizing the initial listing mechanism for innovative drugs, leveraging medical insurance payment standards to guide drug price formation, improving the drug centralized procurement price formation mechanism, and promoting diversified payment for innovative drugs and reasonable price formation.
This is the first national-level document regarding drug pricing. Unlike previous regulatory approaches that focused on &#34;price reduction&#34; or &#34;cost control,&#34; the biggest change in this &#34;Opinion&#34; is that it no longer relies solely on price reduction to mediate drug prices, but considers multiple dimensions such as clinical demand, R&amp;D difficulty, and corporate willingness.
On April 15, at a routine press conference on State Council policies, Deputy Director of the National Medical Insurance Administration, Shi Zihai, clearly pointed out that this &#34;Opinion&#34; implements a classification of drug prices throughout their lifecycle, leaving room for high-level innovative drugs, encouraging companies to continue their R&amp;D innovation while delineating rules for other drugs to set their own prices, guiding companies to price fairly and reasonably.
As a national document for establishing a sound drug pricing system, its core breakthrough is to return the pricing power of drugs to companies, allowing them to set prices autonomously in a competitive market, while the government gradually shifts to being a rule-maker. In the future, more innovative pharmaceutical companies will receive more reasonable returns from pricing, further stimulating market vitality.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OpxJ7PtZU4d0bE4eq8Ri1QIEH5qmC40kOhTaslqaBmS4oAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OpxJ7PtZU4d0bE4eq8Ri1QIEH5qmC40kOhTaslqaBmS4oAA/641"/>
Determining the Initial Price Based on Clinical Value
The introduction of this &#34;Opinion&#34; will undoubtedly change the pricing strategies of pharmaceutical companies in medical insurance negotiations, impacting the development plans of the entire industry.
In the past, some drugs were deliberately priced higher upon market entry to ensure their products could smoothly pass medical insurance negotiations, then significantly reduced their prices during year-end negotiations, creating an illusion for regulatory authorities that &#34;companies are giving concessions,&#34; thereby increasing the probability of entering the medical insurance catalog. This also allowed more room for medical insurance pricing for future annual renewal negotiations.
Such tactics by companies have distorted the pricing of medical insurance to some extent, failing to achieve the goal of cost control while causing turmoil in the production and sales organization of companies, which had to adjust their operations at any time for the potential &#34;second price reduction.&#34;
To correct the current situation, this &#34;Opinion&#34; proposes supportive measures at various stages after the approval and listing of innovative drugs. Wang Xiaoning, Director of the Price and Procurement Department of the National Medical Insurance Administration, introduced that the National Medical Insurance Administration is researching and formulating a mechanism for the initial pricing of drugs, exploring the implementation of self-assessment by companies, and considering factors such as clinical value, market supply and demand, competitive landscape, and social affordability to provide reasonable self-pricing for newly listed innovative drugs
Moreover, this pricing is not fixed; according to the document, companies can make appropriate adjustments based on real-world research results and clinical usage effects from the initial price. In other words, prices can increase after the drug is launched. Of course, the requirements for price increases are very strict.
Although the principles for determining the initial price are relatively broad, the National Healthcare Security Administration has provided a rough classification: innovative drugs are divided into high-level innovative drugs, improved new drugs, and generic drugs. For high-level innovative drugs with high innovation and clinical value, it is supported to set prices that correspond to high investment and high risk at the initial launch, while for improved new drugs, it encourages setting prices that match patient benefits; for generic drugs, it directly refers to existing products on the market.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/O9WdJJoKU-cR5Eo6lo0PXaWksIHLx2wACepW-cvoO-IFQAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/O9WdJJoKU-cR5Eo6lo0PXaWksIHLx2wACepW-cvoO-IFQAA/641"/>
This operation effectively links the two key pricing nodes of the initial launch of innovative drugs and their inclusion in the medical insurance system. If one wants to seek a good price in medical insurance in the future, the initial launch of innovative drugs must strive for the qualification of &#34;high-level innovative drugs,&#34; so that the initial price is higher, and there may be less bargaining when entering medical insurance; while for improved new drugs and generic drugs, careful consideration must be given to the initial pricing, otherwise, it will face severe cuts during the medical insurance phase.
Wang Xiaoning pointed out: The current &#34;Opinions&#34; emphasize optimizing the adjustment rules for the medical insurance catalog, balancing patient benefits and encouraging innovation, and the payment standards formed through negotiation should reasonably reflect the clinical value of the drugs. This means that in the future, medical insurance will have more pricing bias towards FIC/BIC drugs.
Under this mechanism, the logic of drug research and development has undergone structural changes. If a drug cannot prove its clinical value, even if it enters the medical insurance catalog, its price will be severely squeezed. The industry generally believes that the elimination race of China's pharmaceutical industry is being brought forward.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/Opjjm0rcJwiPmfPSLYrEYr1fEm-3tWOIh-jhlrjDr-8S8AA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/Opjjm0rcJwiPmfPSLYrEYr1fEm-3tWOIh-jhlrjDr-8S8AA/641"/>
Using real-world research to assess drug prices
The overall idea of this drug price reform also includes the &#34;stability&#34; of drug prices as a goal written into the framework of the &#34;Opinions,&#34; which is equivalent to giving major pharmaceutical companies a sense of reassurance. If the initial mechanism for innovative drugs can determine the initial price for entering the medical insurance catalog, then the real-world clinical effects are an important basis for the stability of drug prices.
In the past two years, medical insurance has rarely significantly reduced prices when adding indications for innovative drugs, reflecting the principle of &#34;stability.&#34; However, this is not enough, because when better-performing drugs of the same category enter medical insurance, they will inevitably impact the prices of existing drugs, making it impossible to &#34;stabilize.&#34; So how can we improve the &#34;stability&#34; of innovative drugs?
This &#34;Opinion&#34; clearly states: Encourage and support real-world research on drugs listed in the medical insurance catalog and the innovative drug catalog of commercial health insurance, scientifically and objectively assessing the value of drugs, providing a reference for the dynamic adjustment of the medical insurance catalog and payment standards.
Wang Xiaoning pointed out at the press conference: The medical insurance department will legally promote real-world research on drugs, using reliable and credible real-world data to objectively evaluate the value of drugs from multiple dimensions such as clinical effectiveness, innovation, and accessibility. This means that the price of innovative drugs is no longer a &#34;one-time&#34; transaction during medical insurance negotiations, but will be dynamically assessed through real-world research. The medical insurance payment price will transition from a &#34;fixed&#34; pricing model to &#34;dynamic adjustment.&#34;
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OQ33kNCy5CJ2S5V-TMaD0xmbsMqn0hwww46ZNT-vJwKiQAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OQ33kNCy5CJ2S5V-TMaD0xmbsMqn0hwww46ZNT-vJwKiQAA/641"/>
In the future, the launch of innovative drugs will only mark the beginning of assessing drug value, and the dynamic adjustment of their medical insurance pricing will start from the moment the envelope is opened at the medical insurance negotiation site, extending until the drug participates in the national drug procurement, and even until it is delisted. In the future, if a product wants to continue to be reimbursed, it must prove its clinical value through real-world data; otherwise, both the payment price and reimbursement ratio may be adjusted.
Previously, industry experts had indicated to the Health Intelligence Bureau that with the acceleration of new drug approvals, many innovative drugs have a very short time window. What is an innovative drug now may only be one of many products meeting clinical needs within 1 to 2 years after the launch of generic drugs, thus requiring a reassessment of the payment price.
The changes in the terminal market evaluation system will fundamentally alter the thinking model upstream in the industry. Real-world research will guide pharmaceutical companies to shift from &#34;herd&#34; competition in popular targets to competition based on clinical value, starting from the R&amp;D project initiation. China's innovative drug pricing mechanism is transitioning from &#34;pure cost control&#34; to a new stage of &#34;clinical value,&#34; stabilizing market expectations for innovative drugs, guiding capital back to long-term investment value, and promoting high-quality development of the pharmaceutical industry. <img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OpWSnGNezMZCe82nylZ6Dwnh3mbLStyUDEFnVaQENgBpcAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OpWSnGNezMZCe82nylZ6Dwnh3mbLStyUDEFnVaQENgBpcAA/641"/>**
Written by | Lei Gong
Edited by | Jiang Yun Jia Ting
Operation | 23
Illustration | Visual China
Statement: Original content from the Health Intelligence Bureau, please do not reprint without permission

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The National Healthcare Security Administration has released a new policy, stating that the pricing mechanism for innovative drugs will no longer solely rely on price reductions, but will instead be dynamically adjusted through a combination of marketization and government regulation. The new mechanism emphasizes multiple factors such as clinical demand, research and development difficulty, and corporate willingness, encouraging companies to set their own prices and promoting reasonable returns for innovative drugs. This policy will change the negotiation strategies of pharmaceutical companies with healthcare insurance, enhance market vitality, and drive industry development

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Good news for innovative drugs! Medical insurance pricing will no longer solely focus on price cuts, but will be dynamically adjusted