Around The Globe

China Enters 2019:
Encouraging Innovation, Broadening Access
to Medicines

Minhua Chu
VP, Research Intelligence

018 marks a banner year of marketing approvals of new drugs and implementation of important regulatory reform measures in China. On the other hand, the vaccine scandal sounded a significant alert that a stringent regulatory system is very much needed to safeguard the quality of medicinal products and ensure patient safety. Reform of the Drug Administration Law and pricing/reimbursement pressures will drive more changes in 2019 to benefit patients as well as innovative pharmaceutical companies.

Record High for New Drug Approvals

According to the National Medical Products Administration (NMPA), 48 innovative drugs secured regulatory permission to head to market in China. Among them, 38 (79%) were imported, while 10 (21%) came from domestic companies. Small molecules comprised 69% (33), and biological products represented 31% (15), including two preventive vaccines.

By therapeutic field, oncology still holds the most with 20 new therapies approved (including two adjuvant therapies), and infectious diseases was second, mainly driven by HCV and HIV treatments. (See below.)

Several highly-anticipated therapies received regulatory approval in 2018, including three anti-PD-1 antibodies. Two are imported products: Opdivo (Bristol-Myers Squibb) and Keytruda (Merck); the third is toripalimab (Shanghai Topalliance, a local Chinese company), marking the first approval of a locally developed PD-1/PD-L1 antibody product. Gilead’s Vemlidy (HBV), Harvoni (HCV) and Descovy (HIV/AIDS), and rare disease drugs Soliris (Alexion), Hemlibra (Roche) and Uptravi (Actelion/Janssen) were also approved.

Data analysis by one industry intelligence company indicates that NDA review time for small molecules is shortening: The average review time for applications accepted in 2017 was 430 days, compared to 681 days for applications accepted in 2016.

In 2018, NMPA also granted the first worldwide approval of roxadustat, a hypoxia-inducible factor prolyl hydroxylase inhibitor (HIF-PHI) developed by Fibrogen in partnership with AstraZeneca for treatment of anemia caused by chronic kidney disease in patients who are dialysis-dependent. China is the first country to approve this first-in-class drug.

Proposed New Vaccine Management Law

The Chinese government is drafting a new law on vaccine administration, following the vaccine safety scandal earlier in 2018. The draft law was posted online for public consultation on November 11 and is under review by the People’s Congress.

In July 2018, China’s second-largest rabies vaccine maker, Changchun Changsheng Life Sciences, was found to have falsified its production records, used out-of-date materials, mixed different batches of product, and failed to test them properly. Although the company was fined approximately $1.3 billion USD and ordered to set up a compensation scheme for victims, the government also determined that stronger regulation to better safeguard vaccine safety is needed.

The 11-chapter draft law stipulates the supervision and management of vaccine production, research after sales, distribution, and vaccination. Illegal behaviors, including fabrication of data, will be severely punished. According to the draft law, those who participate in illegal behaviors, shield or connive with violators, hide the facts through fabrication, or impede investigation into these behaviors, will receive severe punishment.

Drug Administration Law: Key Draft Amendments

The work of revising the Drug Administration Law has been ongoing since 2016. The draft amendments to the Drug Administration Law were released for public comment on November 1, 2018. One of the major changes will be full implementation of the marketing authorization holder (MAH) system, which has been piloted in ten provinces or cities in China since November 2015; the amended law will expand the system nationwide. This is seen as an important measure to support the growth of biotech companies because it allows the MAH to utilize contract manufacturing organizations to manufacture medicinal products developed by the MAH.

Many successful reform measures implemented over the last three years will also be formally codified into this law. For example, the draft law includes the newly established IND review and approval process. It also includes measures aimed at ensuring continuous quality and safety compliance, such as replacing Good Manufacturing Practice (GMP) and Good Supply Practice (GSP) certification systems with ongoing inspections, introducing a recall system for defective drugs, and implementing significantly more severe penalties for violations of the law.

Price Pressure with Centralized Procurement of Generics

Unlike the Western pharmaceutical market, the so-called “patent cliff” after the innovator’s patent of their product expires and generic versions of the drug become available on the market has not been evident in China. This may start to change. 

A new program of centralized procurement has been recently piloted in four (4) municipal cities (Beijing, Shanghai, Chongqing, and Tianjin) and seven (7) provincial capital cities (“4+7 procurement”). On December 17, 2018, the “4+7” cities’ Joint Procurement Office announced the results of their tender plan of selected generic drugs. This pilot program includes generic drugs that have passed the quality and efficacy consistency evaluation, one of the major initiatives by the former CFDA (now the NMPA) aimed at enhancing generic drug quality. Local generic drugs passing this evaluation are deemed equivalent to the originator’s marketed product.

The “4+7 procurement” pilot included 25 such generic drugs with an assured volume of purchase. According to an analysis by DXY Insight, procurement results show that the average proposed price had fallen by 52%, with the largest decrease being 96% (Beite’s tenofovir disoproxil fumarate tablets, 300mg, 0.59 CNY/tablet). The second largest price decrease is Chia Tai Tian Qing’s entecavir dispersible tables (0.5mg), which dropped 95% to 0.62 CNY per tablet.

Only two multinational companies (MNCs) succeeded in winning the tender with their originator products: AstraZeneca’s Iressa (250mg), decreasing by 66% to 54.7 CNY per tablet, and BMS’ Monopril (10mg), decreasing 59% to 0.84 CNY per tablet.

Outlook for 2019

Reform of the health industry will continue in 2019. With regulatory review and approval speeding up, pharmaceutical companies (especially MNCs) will launch more new drugs in China, with the “time lag” compared to major worldwide approvals greatly reduced. MNCs will also be more open to conducting clinical development earlier in China to maximize opportunities for simultaneous global development. As China evolves from a “me too” market to a “first in class” market, local pharmaceutical and biotech companies will continue to develop or in-license more innovative assets in China, and gain an important competitive advantage.

On the other front, the procurement and reimbursement reform will place pricing pressure on off-patent originators, which in turn will have implications for innovative companies’ portfolios and marketing strategies–encouraging them to speed up bringing new drugs to the China market.