Lacuna HC Observer #34: NRDL – an expensive ticket to access Mainland China

In this post, we try to throw some light on one of the regulatory aspects of the China Healthcare market.

What is NRDL?

The National Reimbursement Drug List (NRDL) is a part of the Chinese Government’s plan to make healthcare affordable and accessible. Inclusion of the drugs on the NRDL means that they will be fully or partially reimbursed at a national level and in general, are the only products prescribed by the public hospitals.

The NRDL established in 2000, was updated only three times before 2017 and focused mostly on the reimbursement of generic drugs. Innovative medicines have faced an enormous struggle to achieve reimbursement. Any product seen as too new or too costly would most likely not make it to the list. Moreover, the list was rarely updated, meaning a lag in evaluating and accepting new medicines.

However, the transformation of the NRDL since 2017 has been substantial; after 8 years of no updates, China agreed that as part of the Healthy China 2030 policy the NRDL would be updated annually. Since then, almost 300 drugs have been added to the NRDL and it now contains a total of 2860 medicines; 1,486 Western-made medicines alongside 1,374 Chinese-patented medicines.

Annual price negotiation with National Healthcare Security Administration (NHSA) has become compulsory for all novel treatments to obtain NRDL inclusion since 2017.?In the 2021 NRDL update, 85 novel treatments were selected for the price negotiation, and 67 (79%) were successfully negotiated and included in the NRDL. The average discount rate reached its highest in 2021 at 62%. The increased discount is especially applicable to Western manufacturers who historically set higher prices. The growing number of drugs from local manufacturers generates downward pricing pressure and results in competitive pricing in national reimbursement negotiations for drugs with the same class or within the same indication.

Why NRDL is an important key to the market?

1) Huge market - As the most populous country in the world with 1.4 billion inhabitants, China has the potential to be an attractive market for pharmaceutical companies. The value of the Chinese market, second only to the US, is estimated to reach USD 161bn by 2023. Gaining access to the NRDL would, therefore appear to be a golden ticket for pharmaceutical companies’ sales.?

2) Branded therapies see a major boost in sales – Most branded therapies see a sharp sales surge post-NRDL inclusion, despite incurring huge price cuts in negotiations. Roche reported more than two and three times higher sales of Herceptin and Avastin, respectively, in the two years following their NRDL inclusion, even though both had price cuts of more than 60%.

3) Decreasing the time lag between approval and NRDL inclusion - The average time delay between the first Mainland China approval and NRDL listing has reduced from 37 months in 2016 to just 10 months in 2020. Reducing delays in NRDL inclusion will allow drug manufacturers to reach the patients in China sooner and maximize market penetration before they lose patent protection.

4) Increased transparency - In addition to faster approval, there has been an increased degree of transparency in the NRDL decision-making. For the first time in history, the submission materials of the 271 successful applications which passed the formal review stage were made public. Historically, understanding the decision process to secure access to NRDL has been challenging and haphazard.

Recent updates

In its annual update Dec-2021, 74 drugs entered the list, out of which 67 drugs that were added pertain to novel therapies reimbursed for the first time in China.

The contribution to the above novel therapies from the local manufacturers was around 63%. For the first time, it exceeded Western Manufacturers.

Price negotiation with the NHSA resulted in an average discount of 62% on the list price.

On Jun-13, 2022, NHSA released a draft paper for innovation drug price renewal in the NRDL. It has come up with clear negotiation rules for the future participating companies which will enable them to better plan their pricing and negotiation strategy to enhance the innovation drug life cycle rule.

Conclusion

In our view, NRDL is one of the main pathways to access the Chinese market. Though Manufacturers face enormous pricing pressure due to the negotiations to get the drugs listed,?the compromises are necessary given the huge patient population it provides access to.?