Inspiration of Foreign Innovative Drug Pricing Methods and Medical Insurance Payment Standards to China

Rao Xiuli,Sun Lihua

(1.School of Business Administration,Shenyang Pharmaceutical University,Shenyang 110016,China;2.Jiangxi Jemincare Group Co.,Ltd.,Nanchang 330096,China)

Abstract Objective To study the innovative drug pricing methods and medical insurance payment standards in foreign countries and to provide reference for China’s government.Methods The official websites were searched for information and related literature,and literature review was used.Results and Conclusion In foreign countries,the clinical value of innovative drugs and their impact on medical insurance funds were comprehensively evaluated based on factors such as quality-adjusted life years,clinical benefit,and improvement of clinical benefit.Then,the evaluation results were taken as an important basis for whether innovative drugs were admitted to the medical insurance catalog and establishing medical insurance payment standards.By using international experience for reference,innovative drug pricing methods and medical insurance payment standards for China’s national conditions can be improved by establishing a basic database of clinical value and drug economic evaluation of innovative drugs,as well as innovative drug payment models based on decision thresholds.

Keywords: innovative drug;pricing method;payment standard;medical insurance;international experience

In order to promote the development of China’s pharmaceutical industry,China’s government has issued a series of policies to encourage the innovation of new drugs.The national macro strategy has shifted from “generic drug production” to “innovative drug production”.Therefore,the innovation ability and international competitiveness of pharmaceutical enterprises have rapidly improved.In recent years,with the successive implementation of policies to encourage pharmaceutical innovation such as accelerating drug review and approval,medical insurance negotiations,and pilot trials,the research and development environment of innovative drug in China has significantly improved,and the commercialization process of innovative drugs has accelerated.Innovative drugs can address the unmet clinical needs of patients with critical diseases,which are of great significance in helping healthy China and improving the life quality of patients.Due to the high risk,long cycle and large investment in research and development of innovative drugs,they are priced high by enterprises after listing,and the burden of patients is heavy.At the present stage,bringing innovative drugs into the national medical insurance is still an important means to improve the accessibility of medication for patients.

In recent years,social attention has gradually shifted from how to accelerate drug review and approval to how to further develop the value of innovative drugs through medical insurance payments to benefit more patients.However,it remains an urgent issue for innovative drug price management to balance the needs of patients,the motivation of enterprise innovation,and the insufficient medical insurance funds.Based on this,this article compares the differences between innovative drug pricing methods and medical insurance payment standards in China and abroad by searching relevant information and literature at home and abroad,thus providing some suggestions for innovative drug pricing and optimizing medical insurance payment standards in China.

1 Innovative drug pricing methods and medical insurance payment standards in foreign countries

In recent years,the speed of listing innovative drugs has been significantly accelerated.Innovative drugs can greatly improve patients’ quality of life,extend their lifespan,and bring hope for their future lives.Innovative drugs entering medical insurance is an important measure to ensure patient access to medication.At present,the biggest buyer of innovative drugs in China is still the national health insurance.The national health insurance system shoulders the mission of guaranteeing basic health and it is impossible to pay for all innovative drugs.Therefore,it should take active measures to formulate innovative drug pricing methods and medical insurance payment standards.For medical insurance access of innovative drugs,developed countries in the world have corresponding pricing methods and payment standards.However,there is no consensus on which pricing method and medical insurance payment are the best.Currently,China adopts a negotiated approach to medical insurance pricing and agreed payment standards for innovative drugs.However,most developed countries adopt the method of health technology evaluation to comprehensively evaluate the clinical value of innovative drugs and their impact on medical insurance funds,and take the evaluation results as an important basis for whether to enter the medical insurance catalog and formulate medical insurance payment standards.The pricing and payment standards for innovative drugs in countries such as the United Kingdom,France,Canada,and Japan all have a method of balancing innovation incentives and affordability under the link between pricing and medical insurance payments.From the perspective of pricing methods,the UK,France,and Canada all take the evaluation results of health technology as the main indicators to evaluate the clinical value of innovative drugs.The evaluation indicator is the incremental cost-effectiveness ratio (ICER),and it has an explicit or implicit ICER threshold.Japan adopts similar drug pricing methods and cost pricing methods.From the perspective of payment standards,the payment standards for medical insurance in the UK and Canada are based on agreements.Patients in France and Japan pay in proportion.Therefore,this article selects the United Kingdom,France,Canada,and Japan,which are similar to China in medical insurance system,medical insurance pricing methods,and medical payment management,as the research objects to conduct a comparative analysis of innovative drug medical insurance pricing methods and payment standards.Their practical experience in innovative drug pricing methods and medical insurance payment management is summarized,which can provide reference for improving China’s innovative drug pricing methods and medical insurance payment management.

1.1 UK

1.1.1 Pricing method

The pricing method for innovative drugs in the UK is mainly the value pricing method.The national health service (NHS) is the main body of health care services in the UK,which implements a national health care policy and provides free health care services to the entire population through government pooling funds.The National Institute for Health and Clinical Excellence (NICE) conducts a health technology assessment (HTA) on drugs,and the evaluation results are used as the decisionmaking basis for whether drugs can enter the UK NHS.The evaluation method is mainly to calculate the economic cost and health output of the drugs to be evaluated and the reference drugs,and compare the difference of medical cost with the health output,and then to obtain the decision threshold indicator ICER.Quality adjusted-life year (QALY) is commonly used as a measure of health output.When making actual decisions,ICER is compared with an external reference value (decision maker’s willingness to pay threshold) to determine whether the evaluated drug is economical[1].

The value evaluation system for innovative drugs is based on the economic evaluation of drugs.ICER is the main indicator used by UK policymakers to measure the cost effectiveness of drugs[2].However,in recent years,NICE has repeatedly discussed the innovative attributes of health technology in its published HTA guidelines,emphasizing that the innovative value that significantly increases clinical treatment benefits but is not reflected in the QALY calculation should be considered in the HTA process,and it is regarded as one of the pieces of evidence that the ICER of the evaluated drugs exceeds the threshold.But they are still recommended for inclusion in the NHS[3-5].

In the UK,the threshold is appropriately adjusted according to patients’ drug satisfaction,product innovation and improvement,and drug substitutability.Meanwhile,it also sets a higher threshold for drugs that treat serious life-threatening diseases,fill clinical needs,exhibit more therapeutic innovation,and have greater improvements compared with other drugs,thus achieving incentives for highly innovative and clinically valuable drugs in the medical insurance access stage.In 2013,NICE carried out a highly professional and technical evaluation plan,and first adjusted the ICER threshold to 100 000 pounds/QALY for drugs treating ultra rare diseases (that is,drugs for treating rare diseases with an incidence of less than 1 000 or an incidence rate of less than 1 : 50 000 in the UK).Ultra rare drugs with an incidence of less than 100 000 pounds/QALY could be directly admitted to medical insurance.Secondly,it adjusted the weight of QALY for drugs with an ICER of over 100 000 pounds per QALY to ensure medical insurance access for drugs with outstanding clinical efficacy[1,4,5].

1.1.2 Payment standard

The payment standard for innovative drugs in the UK is mainly based on the agreed price,which is determined through consultation between pharmaceutical companies and medical insurance payers.Xie Chunyan,et al.[6]summarized the payment standards for innovative drugs in the UK,and then they divided the payment standards for innovative drugs into efficacy-oriented agreements and economic oriented agreements.

Efficacy oriented agreements are payment methods based on outcome risk sharing,and the actual therapeutic effect of innovative drugs is closely related to payment standards.Pharmaceutical companies apply for price negotiation and negotiate with the NHS on the amount,proportion,and method of payment.The NHS makes a final decision on the amount and scope of payment by measuring and analyzing the actual efficacy of drugs or the specific effects of improving the life quality of patients.Efficacy oriented payment methods are used for most anticancer drugs.

An economic oriented agreement refers to linking drug prices and compensation expenses with the financial budget,not changing the published prices of drugs,providing certain discounts/rebates or setting thresholds to control medical insurance expenses based on factors other than actual treatment outcomes.Economic oriented agreements mainly include discount agreements and fixed price agreements.A discount agreement refers to a method of providing a certain discount to the published price of a drug to ensure that the cost effectiveness does not fall below a predetermined threshold.A fixed price agreement refers to fixing the treatment cost of a drug within a specific value or range to ensure that the treatment cost is independent of the dosage[6].

1.2 France

1.2.1 Pricing method

The pricing method of innovative drugs in France is mainly negotiation pricing or reference pricing.After a drug is approved for marketing,the pharmaceutical company must apply to the French Ministry of Health (Haute Autorit é de Sant é,HAS)for inclusion in the medical insurance catalog.After receiving the medical insurance admission application for the drug,HAS entrusts the Transparency Committee (TC) to conduct a HTA on the drug.The Comit é Economiques des Produitsde Sant é (CEPS)will determine the label price of the drug based on the evaluation results.The National Union of Sickness Insurance Funds (UNCAM) will ultimately determine the payment standard for the drug based on the HTA results and the label price of CEPS[7].

The HTA of HAS in France mainly includes clinical benefit level evaluation (SMR) and clinical benefit improvement degree evaluation (ASMR).The evaluation of clinical benefit level is an evaluation of the actual clinical treatment benefit of a drug itself,and its evaluation criteria mainly includes the following four aspects: (1) The severity of the disease;(2) The type of action,effectiveness,and safety of the drug;(3) The status and substitutability of drugs in all treatment options;(4) Public health impacts.According to the evaluation results,it is divided into 4 categories: Significant clinical efficacy,moderate clinical efficacy,weak clinical efficacy,and insufficient clinical efficacy[7].The evaluation of the degree of improvement in clinical benefits is an evaluation in clinical benefits of a drug compared with a reference drug.According to the results,the drug grade is divided into five evaluation results: Significant(ASMR I),important (ASMR II),moderate (ASMR III),small (ASMR IV),and no improvement (ASMR V)[8].Evaluation of the degree of improvement in clinical benefits has an important impact on drug pricing.For drugs with evaluation results of I-III,CEPS will adopt a negotiated pricing method,negotiating with the manufacturer to determine the drug label price based on the EU market reference price and evaluation level.The negotiated drug price can be higher than the reference drug.For drugs with evaluation results of Ⅳ-V,a reference pricing method is used.Drugs with evaluation results of V can only be included in the medical insurance catalog if the drug price is lower than the reference drug price.

1.2.2 Payment standard

The payment standard for innovative drugs in France is proportional payment,which is determined by pharmaceutical companies and UNCAM through consultation.UNCAM determines the drug payment rate based on the SMR report and disease severity provided by TC.The proportions of payment standard corresponding to the SMR rating of significant clinical efficacy,moderate clinical efficacy,weak clinical efficacy,and insufficient clinical efficacy are 100%,65%,35%,and 0%,respectively,with an adjustment range of 5% increase or decrease[9].

1.3 Canada

1.3.1 Pricing method

The pricing method for innovative drugs in Canada is mainly the reference pricing method.Drug prices in Canada are set by the federal and provincial governments.The price of patented drugs is controlled by the federal government.The Patented Medicine Price Review Board (PMPRB) mainly controls the price of patented drugs at the federal level.The committee sets a maximum price limit for innovative drugs,mainly using domestic reference pricing by comparing the price of drugs with similar drugs that are closest to their dosage form,specifications,and efficacy,but the price must be lower than that of similar drugs[10].The increases in price are limited to consumer price index (CPI) increases.The Canadian Agency for Drugs and Technologies in Health(CADTH) is responsible for the health technology evaluation of drugs.

The Human Drug Advisory Panel (HDAP) is a subsidiary of PMPRB,which is responsible for rating the therapeutic value of drugs based on factors such as their clinical effectiveness and cost-benefit analysis.The evaluation results are mainly divided into four levels: breakthrough therapeutic improvement,substantive therapeutic improvement,moderate therapeutic improvement,and slight or no therapeutic improvement.Among them,the major factors for the improvement level of treatment are the improvement of curative effect and the reduction of the incidence or level of important adverse reactions.Secondary factors include the route of administration,improved compliance,and so on.CADTH does not explicitly specify ICER.Based on practical experience,the implicit threshold value of $ 50 000/QALY is generally adopted[11].Based on the review results,CADTH provides recommendations on whether drugs should be included in the provincial medical insurance catalog.The recommendations can be divided into four types: “Recommended for inclusion”“recommended for conditional inclusion” “not recommended for inclusion at the current submitted price” and “not recommended for inclusion”.

1.3.2 Payment standard

The medical insurance payment standard for innovative drugs in Canada is negotiated and agreed by provinces.Canada’s public health insurance is coordinated by provincial governments,which have a high degree of autonomy in the medical insurance access of drugs.The Pan-Canadian Pricing Alliance(pCPA) is responsible for representing provincial public health insurance and negotiating payment standards for innovative drugs with pharmaceutical companies.After pCPA starts the negotiations,a lead province will be determined to represent all provinces that are willing to participate in the negotiations.After reaching an agreement on the initial negotiation of drug payment standards,pharmaceutical companies and the “lead province” sign a letter of intent (LOI)to determine the drug payment standards and drug inclusion conditions.Pharmaceutical companies and participating provinces in the negotiation will negotiate separately according to the terms of the LOI.After reaching an agreement,they will sign product listing agreements (PLAs)[12].

1.4 Japan

1.4.1 Pricing method

The pricing methods for innovative drugs in Japan are mainly similar drug pricing methods or cost pricing methods.If there is a reference drug,a similar efficacy price comparison method shall be used.If there is no reference drug,the cost estimating method is adopted.Factors such as research and development costs,production costs,marketing expenses,and so on will be taken into consideration for the cost estimating method.

Japan implements a dynamic access mechanism for the medical insurance catalog.After new drugs are approved,there are four medical insurance access opportunities per year.The Ministry of Health,Labor and Welfare increases a premium based on the level of innovation of drugs,which is judged according to four points: (1) A new mechanism of action;(2) Higher efficacy or safety;(3) Improvement of the target diseases treatment;(4) Beneficial pharmaceutical formulations.The proportion of premium will vary depending on the level of drug innovation,with a premium range of 5% to 120%.For drugs that have obtained “pioneer recognition” (similar to China’s“breakthrough therapeutic drugs”) are prioritized for marketing in Japan,a 10% to 20% premium will be directly given[13].

In order to alleviate the increasing medical expenses,Japan has adopted cost effectiveness assessment to adjust the price of drugs in the medical insurance catalog since 2012,with a benchmark threshold of 5 million yuan/QALY,and a separate benchmark value for high-value innovative drugs,such as rare diseases,pediatric diseases,malignant tumors,and other therapeutic drugs with limited treatment methods.The benchmark values are 7.5 million yuan/QALY,11.25 million yuan/QALY,and 15 million yuan/QALY[14].Giving high thresholds to innovative drugs that are urgently needed is conducive to stimulating the development of innovative drugs.

1.4.2 Payment standard

The payment standard for innovative drugs in Japan is proportional payment,formulated by the “Association of Traditional Chinese Medicine”in accordance with regulations[12].The payment ratio will consider factors such as population,age,occupation,and family income to make different payment standards.Japan will refer to the data of international medical insurance payment standards when formulating medical insurance payment standards.When there is a significant deviation from the international standards,adjustments will be made and regular random sampling of hospitals,clinics,pharmacies,and all distributors will be conducted for annual market surveys.A payment standard adjustment mechanism based on market prices has been established.In addition,Japan has established a nationwide unified medical insurance data system to ensure data sharing.It can combine statistical methods and pharmaceutical analysis to achieve accurate prediction of drug sales,then,it can form price adjustment mechanism of timely feedback.Japan adjusts the medical insurance payment standard based on the price difference between the medical insurance payment price and the actual transaction price every year.The price for some special situations such as market expansion and indication expansion are adjusted.If the annual sales volume is within the range of 100 to 150 billion yen and the budget impact analysis exceeds 150%,the price will be reduced by 25%.If the annual sales exceed 150 billion yuan and the budget impact analysis exceeds 130%,the price will be reduced by 50%.

2 Innovative drug pricing methods and medical insurance payment standards in China

2.1 Pricing method

Currently,the main pricing method for innovative drugs in China is negotiation pricing.The “Opinions of the Central Committee of the Communist Party of China and the State Council on Deepening the Reform of the Medical Insurance System” issued in February 2020 clearly states that it is necessary to improve the dynamic adjustment mechanism of the medical insurance catalog.It includes drugs with high clinical value and excellent economic evaluation into the payment scope and improves the medical insurance access negotiation system.The pricing method for innovative drugs in China is based on the calculation of pharmacoeconomics experts and medical insurance experts respectively.Pharmacoeconomics experts conduct drug economic evaluation,generally taking 1-3 times the per capita GDP as the recommended threshold for innovative drugs.However,there is no consensus on cost-effectiveness threshold in China’s medical insurance access decision-making,which also affects whether to adopt quantitative and objective standards for innovative drugs[15].According to the overall situation of the medical insurance fund,medical insurance experts calculate the price of innovative drugs newly admitted medical insurance catalog.After calculation,a negotiating floor price will be formed.In 2022,the government adjusted the process of negotiating drug renewal to include new indications in the scope of simple renewal.The drugs to be renewed must first meet the requirements of exclusive varieties.During the agreement period,the actual expenditure of the fund does not exceed 200%of the estimated value.For innovative drugs which do not conform to the management of regular catalog,in the next two years,if the increase of fund expenditure is reasonable,there is no significant change in the market environment,simple renewal can be applied as required.Negotiation pricing method and simple renewal method are currently the main pricing methods for innovative drugs in China.

2.2 Payment standard

At present,the medical insurance payment standard for innovative drugs in China is made by agreement.Based on the negotiated price,innovative drugs are paid according to “one variety,one price”.At the end of July 2022,the National Health Insurance Bureau issued the “Interim Measures for the Administration of Medication in Basic Medical Insurance”,proposing adjustment of national medical insurance drug catalog and formation mechanism of medical insurance payment standards.It clarified that the gap between the actual expenditure of the medical insurance fund during the agreement period and the budget submitted by pharmaceutical company before the negotiation is the main factor determining how to adjust the payment standards when renewing the contract[16].

3 Discussion and suggestions

The core value of innovative drugs lies in meeting unmet clinical needs.At present,the inclusion of innovative drugs in the national medical insurance reimbursement directory is still an important means to improve the accessibility of medication for patients.Due to the big national population and limited medical insurance funds,there are still some high-value innovative drugs that cannot be included in medical insurance.Therefore,in order to further improve the accessibility of clinical medication,based on the above international experience,pricing methods and medical insurance payment standards for innovative drugs in China is explored,thus improving medical insurance access of innovative drugs.

3.1 Exploring the basic database for clinical value evaluation and drug economy evaluation

The establishment of a clinical value evaluation system for innovative drugs can provide scientific evaluation criteria for determining the clinical value of innovative drugs in China.At the same time,the unity of data and indicators for drug economy evaluation is indispensable for the scientific and reasonable economic evaluation in the drug pricing process.Referring to Canada’s experience in evaluating the value of innovative drugs,in the future,we can combine clinical value evaluation with drug economic evaluation in medical insurance admission negotiation for innovative drugs in China,which can improve the decision-making basis for medical insurance admission of innovative drugs by building a basic database for clinical value evaluation and drug economic evaluation.Based on epidemiological and clinical drug use data,scientific and effective evaluation of the value of innovative drugs is conducted through indicators such as the effectiveness of drug intervention for some specific diseases recognized by medical and health experts.The establishment of a database for clinical value evaluation and drug economy evaluation ensures the scientific and reasonable data indicators at the basic level,and it can avoid or reduce subjective bias in evaluation results caused by the inclusion of data from different sources or evaluation indicators by different research institutions,which may lead to biased decision-making.Establishing a basic database for clinical value evaluation and drug economy evaluation can also provide basic support for research and decision-making related to innovative drugs’medical insurance access,drug procurement,and medical insurance payment.Lastly,it can further improve access models for innovative drugs in China’s medical insurance negotiation based on clinical value evaluation.

3.2 Exploring the payment model of medical insurance for innovative drugs based on decision threshold

It remains an urgent issue for innovative drug price management on balancing the needs of patients,the motivation of enterprise innovation,and the payment ability of medical insurance funds.Based on the UK experience,it is recommended to explore a medical insurance payment model of innovative drugs suitable for China.The payment standard of medical insurance for innovative drugs should not only consider economic evaluation indicators,but also be guided by clinical needs.Multiple factors such as the urgency of clinical diseases and incremental value should be considered.It is recommended to establish different decision thresholds for different types of diseases,medication conditions,or drug characteristics.The decision threshold is based on the consideration of medical insurance funds.On the basis of maintaining the total amount of medical insurance funds,by comparing with the same type of drugs that have been included in the medical insurance catalog with the highest payment standard,the medical insurance payment standard for innovative drugs with high clinical value is inversely introduced through usage and dosage[17].The portion of payment higher than the medical insurance reimbursement standard should be borne by the patients.Therefore,without increasing the medical insurance funds,patients can choose from different innovative drugs,which enables more innovative drugs with high clinical value to receive corresponding returns and exert their due clinical value.Besides,decision threshold helps control the overall medical insurance fund and share payment with patients.It can make more patients afford innovative drugs with high clinical value,greatly enhancing the social value of innovative drugs,and playing a positive role in encouraging the fast development of innovative products.

4 Summary

This article studies the pricing methods and medical insurance payment standards of innovative drugs in some countries to summarize their experience.By using international experience for reference,we can formulate pricing methods and medical insurance payment standards for innovative drugs that are suitable for China’s national condition.Some aspects can be improved such as establishing a basic database for clinical value evaluation and drug economy evaluation of innovative drugs,as well as payment models of innovative drugs based on decision thresholds,which can further optimize China’s innovative drug pricing methods and medical insurance payment standards.