National health insurance "cage for bird" and generic drug enterprises to upgrade the three steps

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Improving the drug use structure and making room for the reform of public hospitals is one of the key tasks of the state in organizing centralized drug procurement and use pilot projects. Hu Jinglin, director of the State Medical Insurance Bureau, said at the national medical security work conference held in January this year that according to the results of the "4+7" volume procurement, it is estimated that the drug procurement cost of corresponding varieties in 11 cities will drop from 7.7 billion yuan to 1.9 billion yuan, and the cost will drop by 75.3. The vast majority of the selected varieties are generic drugs.

By comparing the aging process of China, the United States and Japan and their medical expenses, the proportion of the total cost of generic drugs to the total cost of drugs, and combined with the health insurance policy introduced by the state, the author analyzes how much room there is for the price reduction of generic drugs in China and how generic drug enterprises can quickly transform and upgrade.

Comparison of Aging and Medical Expenses Composition in China, America and Japan

Aging is an important factor affecting health expenditure. Since the world entered an aging society in 2002, the proportion of people over 65 years old in the total population has increased from 7% to 14%. It took about 79 years for the United States to enter an aging society, while Japan took 25 years (1970-1995) to complete the deep aging process. China has entered an aging society since 2000 and is expected to complete the aging process around 2025.

In the process of rising medical and health costs caused by aging, Japan has completed universal medical coverage for the 0.127 billion population with only 7.81 per cent of GDP (2016), thanks to the combined actions taken by the Japanese government to control drug prices, promote drug re-evaluation, and replace original drugs with generic drugs. In 2016, the United States spent 18 percent of its GDP on health care. In China, the medical and health expenses brought about by aging have increased rapidly. The proportion of medical and health expenses in GDP in China has continued to increase, reaching 6.23 in 2016, and has increased by 0.2 on average in recent years.

Total health spending, per capita health spending, and per capita drug spending in the United States are among the highest in the world, mainly due to the high cost of medical services in the United States. In fact, total drug costs in the United States represent only 13% of total health costs (2016).

It is worth noting that the proportion of per capita drug costs in per capita GDP in China, the United States and Japan is almost the same, all around 2%.

In 2016, China's total drug costs accounted for 35.8 per cent of total health costs, and although this proportion has been declining in recent years (by an average of 1 per cent per year), it is still much higher than in the United States (13 per cent) and Japan (25 per cent). Calculated at this rate, in 10 years, the proportion of total drug costs in total health costs in my country will drop to about 25%.

In 2016, the size of China's generic drug market was about 916.7 billion yuan, accounting for 53% of the total cost of drugs in that year (excluding original research drugs with expired patents), much higher than that of the United States (15%) and Japan (14%). At the same time, the proportion of generic drug costs in total health costs in China (19%) is much higher than that in the United States (2%) and Japan (4%), and there is huge room for decline (see table).

The Four Meaning of "Changing Cages for Birds"

Although the Chinese government's investment in health care will further increase, the growth rate has gradually slowed down and the relative proportion has declined. Therefore, the improvement of my country's medical and health conditions in the future will depend to a greater extent on the reform of the medical system and the improvement of efficiency, rather than relying solely on the increase in overall medical and health investment.

The purpose of medical system reform is to straighten out the interests of all parties, promote the development of social resources to better meet the health needs of the people and make China's pharmaceutical industry bigger and stronger. In order to achieve this goal, we must rely on the stock of resources, that is, "vacating cages for birds"-improving the structure of medication and making room for the reform of public hospitals.

"Cage for bird" has four meanings, that is, through the quality and efficacy of consistency evaluation of generic drugs to replace the original patent expired drugs, therapeutic drugs to replace auxiliary drugs, innovative drugs to replace patent expired drugs, medical services to replace drugs, the impact will be huge.

Assuming that by 2021, the proportion of total drug costs in China's total health costs is controlled at about 30% and by 2026 at about 25%, how much room will be left for medical services? According to the current annual growth of about 13% in China's total health costs, by 2021, about 400 billion yuan of drug costs will be saved for medical services; by 2026, about 1.4 trillion yuan of drug costs will be saved for medical services.

When the total cost of generic drugs is controlled at 10% or even 5% of the total health cost, the size of the generic drug market will be greatly reduced.

Therefore, if generic drug companies want to survive in the future, they must occupy an advantage in a very limited market space. This time window will be 3-5 years, and the optimistic point is 6-8 years.

Generic drug enterprises technology upgrade three steps

With the deepening of the reform of the medical system, pharmaceutical companies should examine their own strategic resources, clarify the direction of development, and formulate short-term (3 years), medium-and long-term (5-8 years) and long-term (10 years) strategic goals. For many small and medium-sized pharmaceutical companies, technology upgrading and transformation take time, and they must survive before the transformation is successful. Therefore, the development of generic drugs is still a must for many companies in the short term.

To develop generic drugs, first of all, the selection of topics is very critical, especially the rapid increase in research and development costs of ordinary generic drugs, and the limited funds and time of enterprises. How to use the least funds to obtain more market returns requires comprehensive evaluation and analysis. Many companies have become more and more aware of the importance of this work; secondly, the development of generic drugs needs to meet clinical needs. The business logic of generic drugs is different from innovative drugs, the core of its competition is speed and price, strong imitation is only fast, and many imitations are only cheap; third, technology upgrading is the only way. If generic drug companies want to gain a firm foothold in the fierce market competition, they need to cross the three steps of technology upgrading.

The first step: make full use of patents, policies, technical barriers to build a niche market

This step is done, enterprises can get 5 to 8 years of breathing time, to facilitate the follow-up to continue to transform and upgrade. In terms of patent barriers, patent challenge is a more feasible path at present. If the patent challenge is successful, the product can be listed in advance and enjoy the market monopoly period; even if the patent challenge is unsuccessful, the product must wait until the patent expires, but the product still exists, which does not mean that the research and development has failed. In terms of policy barriers, according to the current regulations, narcotic drugs and category I psychotropic drugs are priced by the state and do not participate in centralized bidding and procurement of drugs. In addition, women and children Junior College generic drugs, emergency (rescue) drugs, drugs with small clinical dosage, directly linked to the network procurement, do not participate in the centralized bidding procurement of drugs. Technical barriers, technical threshold for time and market space, there are technical difficulties, including compound preparations, slow-controlled release, nanocrystals, solid dispersion preparations.

At the same time, the upgrading of preparation technology should take into account the medication problems of the elderly, and the preparation improvement and redevelopment should be carried out according to the physiological characteristics of the elderly population, such as dry mouth, dysphagia and constipation. In addition, the elderly often see vision loss, cognitive impairment, and inconvenience, and it may be difficult to take out tiny drugs. Drug packaging must have strong recognition to facilitate the use of the elderly. Therefore, improving the compliance of elderly patients is also the direction of improving the preparation technology.

The second step: take clinical needs as the core, make improved new drugs according to the "work Plan for the Reform of Classification of Chemical Drug Registration". Class 2 new drugs (improved new drugs) should have "clinical advantages" and Class 1 new drugs should have "clinical value". Therefore, the key to the development of improved new drugs is to find out the clinical needs and conduct in-depth research on the physical and chemical properties of drugs and preparation methods. In addition, to identify the clinical needs of the clinical line, in-depth communication with doctors.

The third ladder: to clinical value as the core, to do innovative drugs

Although the research and development of Class 1 new drugs is not easy, throughout the history of generic drug development in Japan and the United States, small and medium-sized generic drug companies will eventually come to technological innovation. At this stage, many generic drug companies in my country basically do not have the ability to carry out innovative drug research and development, but it is recommended to start learning and research as soon as possible, pay attention to innovative drug research and development, and improve the ability to analyze and make decisions on innovative drugs.