Will China's Enlarged Medical Insurance System Cover More Oncology Treatments?

SHANGHAI - Although China's pharmaceutical market slowed down in the first quarter of 2011 due to price cuts and policy headwinds, it still grew at 14.5% compared to the same period last year, according to data from investment brokerage Citi. Growth largely was driven by increasing medical expenses in the world second largest economy, and in particular was fueled by China's second and third-tier cities, away from the coast, which saw first quarter prescription drug growth rates between 20-30% year over year.

Growth is likely to continue on the back of healthcare reforms funded by the national and provincial governments, which aim to offer basic medical insurance to all of China's 1.3 billion people.

As cancer is the second-leading killer in China, only behind cardiovascular disease, China's expanded medical reimbursement system is expected to cover more oncology treatments.

For instance, in June, Minister of Health Chen Zhu noted in a meeting that China plans to add six new diseases, including breast cancer and cervical cancer, to rural medical insurance under a pilot reimbursement program that is expected to expand to all rural areas in the country in September (Also see "Cost Of China Healthcare Reforms Exceeds RMB 1 Trillion; Government Raises Reimbursement Ceilings" - Scrip, 14 Mar, 2011.).

However, targeted therapies are not within the government focus, at least for now.

"Breast cancer and cervical cancer are in most, if not all, of the provinces priority disease plans," said Helen Chen, head of the China healthcare practice for consultancy L.E.K. "The focus for these are likely to remain diagnosis, and then first-line treatment such as surgery and generic chemotherapy."

"It's a big leap to say cancer, and then immediately jump to targeted therapies, at least for the [Essential Drug List]," she told PharmAsia News.

Targeted Therapies Unlikely Being Included

In 2009, when the EDL was first released, Minister Zhu said the health ministry would release an expanded EDL for mid-sized and large public hospitals to cover more therapeutic areas such as cancer.

Although the second part of the EDL will cover more drugs, opportunities to include more branded drugs and innovative drugs are low, analysts said at that time (Also see "Second Part Of Essential Drug List Will Cover More Therapeutic Areas, Says China's Minister Of Health" - Scrip, 25 Aug, 2009.).

The second part of the EDL has yet to be released, and there has been no indication from the government that the process will resume soon.

"This process does seem to have stopped," L.E.K.'s Chen agreed. She noted that the last concrete document on oncology reimbursement was a draft published to consider targeted therapies for reimbursement on the National Drug Reimbursement List.

Currently, many older oncology drugs, primarily chemotherapies, are listed on the NDRL; however, newer, targeted therapies such as Novartis AG's Gleevec (imatinib) and Pfizer Inc.'s Sutent (sunitinib) are not listed, meaning patients must pay out-of pocket (Also see "MNCs Need China-Oriented Oncology Strategy Mixed With Pricing Know-how" - Scrip, 14 Dec, 2010.).

Nevertheless, multinationals have done relatively well so far targeting more affluent patients. Roche AG leads the anti-cancer market in China with a 13% share on the back of targeted products like Mabthera (rituximab), Herceptin (trastuzumab) and Tarceva (erlotinib), none of which are reimbursed, according to a recent note to investors by Citi.

In mid-2010, 12 innovative oncology products, including Roche's Tarceva and Herceptin, AstraZeneca PLC's Iressa (gefitinib), Merck KGaA's Erbitux (cetuximab) and Pfizer's Sutent were selected by China's Ministry of Human Resources and Social Security for negotiation to be included in the NDRL. However, it appears that there has been no progress since then.

"There is no active negotiation with the pharma companies on this as far as I am aware of," Chen said.

"Most of the pharma companies do want their products to be listed in the NRDL," said Ellon Xu, head of the greater China life sciences practice for consultancy Monitor Group. "However, the government so far has not shown clear willingness to offer reimbursement on drugs with only a single supplier."

"The government could be exposed to significant financial risk with limited negotiation power on price," Xu told PharmAsia News. "In addition, price and reimbursement are managed by different ministries in China. Thus, it is difficult for the Chinese government to assess the volume/price trade off and the net impact on the healthcare budget."

On the other hand, pharma companies also have to weigh the tradeoff between volume and price, said Xu, and the potential threat to global pricing integrity is a real concern.

Leading domestic players such as Jiangsu Hengrui Medicine Co. Ltd. and Sihuan Pharmaceutical Holdings Group have developed generic versions for conventional chemotherapy drugs, Xu noted. However, so far no Chinese firms have placed a viable targeted therapy on the market, which is dominated by multinationals like Roche, Novartis and AstraZeneca.

China's medical payment system is complex, Xu noted, with EDL covering basic medical needs, NRDL offering broader disease coverage and then patients paying out-of-pocket, with some commercial insurance, for premium treatments.

"China is willing to increase investment for public healthcare," he added. "In the long term, the EDL and NRDL will be broader as the economy continues to improve," said Xu, who believes the EDL may cover more conventional chemotherapies in the future.

However, China has not taken a clear stand yet. "For some affluent areas, the local government may consider covering these targeted therapies to some extent, while the poorer regions lack financial support to include high price treatments," Xu said.

Clinical Concerns Will Affect Government Decision

Designed based on contemporary understanding of biological pathways involved in carcinogenesis, targeted therapies are widely expected to be effective in multiple cancer indications. In reality, however, many have faced disappointments beyond initial launch indications either for clinical or health economic reasons.

For example, Pfizer's Sutent, initially approved for the treatment of gastrointestinal stromal tumors (GIST) and metastatic renal cell carcinoma (RCC), has faced several development setbacks for advanced breast cancer, liver cancer and non-small cell lung cancer (Also see "Sutent Pancreatic Tumor Study Shows Regulatory Pitfalls Of Stopping Early" - Pink Sheet, 18 Apr, 2011.).

Roche's Avastin was initially approved for the treatment of metastatic colon cancer and NSCLC by U.S. FDA, and later approved in 2008 for the treatment of metastatic breast cancer. However, FDA is now looking to revoke the breast cancer indication under its accelerated approval regulations after confirmatory trials did not replicate the level of benefit seen in the pivotal trial (Also see "Avastin Breast Cancer Approval Memo Comes Back To Haunt FDA’s Pazdur" - Pink Sheet, 18 Jul, 2011.).

And in the UK, the National Institute of Clinical Excellence has rejected paying for Avastin for metastatic breast cancer or advanced bowel cancer claiming that the price is too high given its benefits.

"For China's government, the concerns around clinical and health economic benefits [around these targeted therapies] is far from settled," Xu said.

So, the government is encouraging pilot projects to gather more information and evidence. For example, in Guangzhou, some NSCLC patients with an epidermal growth factor mutation can get up to RMB 15,000 per month from the Urban Employee Basic Medical Insurance scheme to reimburse for Iressa or Tarceva.

"This is a very small pilot project, which only involved two products and three hospitals," Xu cautioned. "And only about a dozen doctors can prescribe these drugs."

However, the trend of healthcare reform suggests that more oncology treatments will eventually be reimbursed, Xu concluded, although for targeted therapies, it could be a long road ahead.

-Dai Jialing ([email protected])