HONG KONG – After a prolonged negotiation process, China has secured drug prices that are, in some cases, much lower than those in Europe and other developed markets.

Months after price negotiations with domestic and multinational drugmakers ended, China's Ministry of Human Resources and Social Security (MHRSS) finally released this week a list of 36 pharmaceutical products on the 2017 National Reimbursed Drug List (NRDL) that will be covered by national basic medical insurance, work-related injury insurance and maternity insurance. And the prices of those drugs will be much lower than elsewhere.

"On average, these drug prices are lowered by 44 percent, with a highest discount of 70 percent," said the MHRSS in the notice. "Most of the post-negotiation prices of imported drugs are lower than that of neighboring markets, which greatly lightened the burden of medical care for Chinese patients."

The MHRSS first released in April a list of 44 drug candidates that were potentially eligible to be put on the final list, and ended up cutting that down to 36. Only five are Chinese patent medicines and 31 are Western pharmaceutical products sold by both Chinese and foreign companies. Companies have three chances to pitch their proposed drug prices to the government and if they are accepted, they will be shortlisted. Otherwise, they will exit the negotiation immediately.

The negotiated prices include payments made by both the government and patients, but the proportion of the two parts is to be decided regionally. The negotiated prices are valid until the end of 2019, but they are also subject to change if any generic versions of those listed drugs are launched during that period.

"This could have some impact on public pharma companies that have similar products as those drugs on the list," David Li, associate director of research at Bocom International Securities Ltd., told BioWorld. "For example, 3sbio's exenatide injection Byetta [to treat type 2 diabetes] is a major competitor to Novo Nordisk's liraglutide. Liraglutide's price is reduced by 43 percent to RMB410 [US$60.57], so it would threaten the sales of 3sbio's product."

Swiss pharmaceutical major Roche Holding AG bagged four spots on the list, making it the winner amongst others. Four of its targeted therapy drugs, trastuzumab, erlotinib, bevacizumab and rituximab, are now in the NRDL.

Roche said it believes that the inclusion of cancer drugs has demonstrated the government's efforts in deepening China's health care reform. The company said the government's negotiation process has demonstrated the principle of "fairness and transparency" while taking into account the enlisting of innovative drugs to tackle unmet medical needs.

"With our purpose 'doing now what patients need next', Roche has been proactively supporting and collaborating with the state government to deepen health care reform and to improve availability and affordability of the products," said Shanghai Roche Pharmaceuticals Ltd.'s general manager, Zhou Hong. "We will continue working with various stakeholders, including the local governments, medical institutions and other organizations for the NRDL's implementation to benefit more Chinese patients."

The Chinese government has released several documents that encourage domestic drug development and technology innovation. It is also exploring the generic drug space. So the Chinese pharmaceutical companies are slowly but surely catching up with their counterparts abroad.

That gives the Chinese government more leverage to choose domestic products over imported ones. And it is likely one of the reasons some drugs can be negotiated down to a much lower price than in other markets such as Europe and the U.S. For example, breast cancer drug trastuzumab (440 mg) is now sold at ¥7,600 (US$1,123), a 64.8 percent drop from the original price of ¥24,500, which is about the same as the retail price in the U.S.

"The Chinese government is trying to foster domestic pharma companies – assisting in increasing the quality of their products and overall competitiveness, while it cuts down imported drugs' prices. This way it has alternative options if the MNCs didn't agree to their desired low prices," said Li. "Quite a tricky situation for drug developers, especially with such big R&D expenditures."

However, it's not all bad news for the big international pharmaceutical companies.

"The success of the negotiation depends on the evaluation of loss and gain on individual products – to decide if price is more important or volume," Li added. "Companies could gain more profits by getting the drugs on the list because it will most likely increase the sales volume greatly. In fact, this has been the case for most of the companies that have products enlisted so far."

As the next step, local governments are expected to confirm the percentage of the cost that will be covered by the insurance and fully implement the new NRDL.