By Li Xiaofeng, Manager, Monitor Deloitte, London and David Xie, Director, Monitor Deloitte, Shanghai
China has rapidly become one of the larges biopharmaceuticals (biopharma) and medical products markets in the world and is projected to reach $145-175 billion in sales by 2022 (representing a compound annual growth rate of more than 5.5 percent from 2017).1 Profound changes, particularly in relation to shortening the time taken to obtain regulatory approval and widening market access, are making China a more attractive market for biopharma companies to launch innovative medical products. Indeed, since 2017, China has approved record numbers of innovative foreign drugs.2,3 These approvals follow a series of policy moves to provide public funding to enable China’s 1.4 billion population to access new, lifesaving drugs, especially cancer therapies. However many drug makers have had to slash prices so that government will cover the costs of some of the advanced treatments.4
Key factors for launch success in China
Biopharma companies recognise the significance of China in global markets, and the importance of being able to launch their products effectively. However, the vast majority of companies are often disappointed by their commercial launches in China. The fast-moving landscape and unique market characteristics often demand that the biopharma management teams have a ‘China perspective’ and have different launch strategies to those used in the West. Our recent experience in supporting biopharma companies has enabled our team to identify four critical areas that are crucial for a successful launch in China.
1. Understanding the regulatory landscape in China
Previously, foreign innovative drugs were delayed by an average of five to seven years before receiving approval in China – mainly due to the slow review process and additional local requirements. For example, a local study cannot start before the completion of a phase 2 study outside China.5 In 2017, the China Food and Drug Administration (CFDA) announced a series of regulatory reforms aimed at accelerating marketing authorisation of medical innovations, such as a fast-track approval process and a potential local study waiver for products targeting rare diseases or diseases with high unmet needs.6
Understanding and utilising these processes has allowed some companies to successfully shorten the time-to-market in China with products receiving CFDA approval within 12 months of the European Medicines Agency (EMA) and US Food and Drug Administration (FDA) approval. However, other organisations are yet to update their launch strategies and continue to view China as a ‘Wave 2’ market in clinical programmes, resulting in a loss of competitive advantage. Moreover, there is still considerable ambiguity in how China’s new regulations apply to specific development programmes. Biopharma companies therefore need to have an active local regulatory/development team to engage frequently with the local authorities in order to assess the likelihood of success in utilising the different regulatory paths.
2. Market access/reimbursement
Market access in China is evolving rapidly. Historically it has been difficult for innovative medicines to achieve reimbursement. From 2001-2016, the national reimbursement drug list (NRDL- a list of drugs for which the government pays some or all of the cost) was updated only three times with limited inclusion of innovative medicines.7 More recently, China updated its NRDL in both 2017 and 2018. An important development was the introduction of a new price negotiation mechanism. Following a small pilot in 2015, in 2017, 45 medicines were invited into price negotiations and 36 of them including a number of blockbuster products, reached agreements to join the NRDL.8 However, success came at a price – specifically, an average price cut of 44 per cent.
In 2018, another 17 cancer drugs were added to the NRDL with an average 57 per cent discount.9 In contrast to the NRDL norm of reimbursing established products, ten of the 17 drugs in 2018 were new products that entered the market after 2017 – a positive sign suggesting reimbursement in China may now happen more quickly. Moreover, sub-national payers and private insurers have also been proactive in experimenting and piloting different programmes (such as outcome-based schemes) to enhance patient access.
The new reimbursement mechanism requires companies to explore the options for the volume/price trade-off exhaustively and to evaluate the brand opportunity in a more sophisticated way compared to the traditional assessment for a self-pay market. Companies who want to succeed in launching future products must stay on top of the changing dynamics and continue to explore new access options for patients.
3. Digital and technologies
Traditionally, China has been based on a ‘Face 2 Face’ business culture. However, thanks to large government led infrastructure programmes and investment, China is leading the way in digital innovation. Through the wide spread adoption of smart devices to innovative digital applications and tools, China has become a mobile first economy. Both patients and physicians are changing their behaviour in this new digital world, with the rise of digital technologies and the associated ecosystem of partnerships transforming the way in which a new product is launched and patients interact with them. For example, vaccines manufactures have initiated partnerships with local e-commerce platforms to offer vaccination consultations online.
It is undeniable that digital capability is now critical to a successful launch in the new era with increasing numbers of companies partnering with local digital players in an attempt to expand the coverage and depth of market-shaping activities, capture deeper customer insights via ‘big data’ or provide better value-added customer solutions beyond the products themselves. Although most companies are still on the journey of embedding digital technologies, those leading the market often have four key attributes driving their success (See Figure 1).
Figure 1: Key attributes of companies successful at embedding digital technologies
Another key ingredient for launch excellence is having the agility to react to the rapidly evolving healthcare environment in China. However, there remain countless uncertainties, such as:
- budding innovative domestic newcomers (as at 2018, over 130 Class I domestic pipeline products are in registration or undergoing Phase 3)
- the trade wars between US and China
- deepening health reform with a growing tiered healthcare system
- evolving payers at the sub-regional and hospital level and in the private sector.
Having just one area of uncertainty could easily affect a company-wide, and specific product launch strategy in China. In our experience, many multinational companies are yet to establish an internal infrastructure or a systematic launch framework to permit an agile approach in China. Companies applying a generalised approach to developing a roadmap and Key Performance Index (KPIs) often face difficulties when unexpected market events take place. Global and local teams need to build a more agile collaboration mechanism and also embrace enhanced capabilities, such as scenario-based strategic management to support launch excellence and product cycle management in an ever-changing market place.
As China’s health care reforms continue to evolve, biopharma companies are facing an attractive yet fast-moving environment. Capitalising on the opportunities requires working with the evolving system in creative ways. A deep understanding of the dynamic system, strong organisational capabilities and an agile approach are the critical successful factors in the increasingly competitive market. The companies that succeed within China will be those who begin their preparation and planning early.
1 IQVIA market prognosis