HONG KONG The CFDA has issued a new rule that cuts the timing and pricing gaps between overseas and domestic drug launches, which is likely to improve access to innovative drugs for patients and accelerate drugmakers' strategies in China.
"We see greater transparency and the focus on drug approvals as positive developments for the sale of patented medicines in China. This will also bode well for the commercial prospects of multinational drugmakers," Kaushal Shah, head of pharmaceuticals and health care at BMI research told BioWorld Asia. "Multinational pharma companies have long been complaining that it takes too long to get their drugs into the Chinese market.
The rule allows drugs without new drug applications (NDAs) overseas to apply for NDAs in China and expands Chinese multicenter trial limits from phase II to phase I trials. Besides making the drug launch process substantially easier for MNCs in China, the new changes also reduces the market for me-too and me-better generics, Jefferies analyst Eugene Huang wrote in a note.
"We foresee a likely China-refocused shift for MNCs, and view it a major positive to Chinese CROs/CSOs while negative to domestic class 3 generics," Huang wrote. "We think this new reform has proved once again the CFDA's determined initiative to prioritize innovation and drug quality."
The new rule will affect class 3 me-too and me-better generics in China the most. These drugs will potentially be downgraded to class 4.
Before the changes, NDAs in China were permitted only if a drug had undergone full clinical trials in the country and was manufactured domestically. As a result, many MNCs skipped China because the "three-application, three-approval" policy meant that efficacy data from multicenter trials became irrelevant for applications.
"In contrast, the new rule deducts one clinical application procedure for imported drugs. We think this will largely save time and cost for MNCs' new drug launches in China," said Huang.
The significant clinical and registration cost savings could fundamentally change MNCs' pricing strategy in China and narrow the price gap between MNC and domestic generics.
China's huge population means there is a large patient base, especially in areas like oncology. The country's average income is increasing and the population is aging, which is leading to rapid increases in health care demand and expenditures. This makes the market attractive to MNC pharmaceuticals as patient recruiting and saving clinical cost is not difficult.
"China's health care landscape is changing and improving very quickly. Over the past few years, more and more multinational drug and health care companies have shown interest in China. Many have invested there because they see the potential. The market is not only huge, but also has increasing demand because more and more people can now afford quality drugs and health services," Sigal Atzmon, president at Medix Group, told BioWorld Asia. Medix is a medical services consultancy that primarily serves markets in Europe and Asia.
"We will continue to see better access to high-quality drugs in China, both from multinationals and domestic companies, especially as the regulations become more mature," she added.
According to Huang, conducting multicenter trials in China is also helpful to local registration and academic promotion.
A WIN FOR CROs, TOO
"As the CFDA widens multicenter trial limit from [phase] II to [phase] I in China this time, we think the new policy will bring a great opportunity to Chinese CROs with incremental multicenter trials in China. Moreover, given the tight clinical resources in China, we believe CROs will be able to continue raising their charges in many years. Besides, we think this new rule will also give more licensing-in opportunities to Chinese CSOs from those smaller foreign R&D companies," Huang said.
The new rule on imported drugs as well as many of the other CFDA reforms since Bi Jinquan was appointed the new bureau head in 2015 is similar to rules from the U.S. FDA and other regulated markets. Industry analysts therefore believe that the CFDA will continue to refer to FDA's policies.
"We think a study on the U.S. FDA's policies might provide useful clues to future possible moves from the CFDA. In our view, the next focus for the regulator might be improving transparency of the drug reviewing system," says Huang.
In 2016, the CFDA approved 455 chemical investigational new drug (IND) applications, including 139 multicenter trial applications with 59 trials in oncology.
There has also been an increase of innovative drug candidates due to the CFDA's encouraging priority review policy. In 2016, there were 240 new innovative drug applications (the previous class 1.1 and 1.2 and the new class 1) including 28 overseas drug applications, according to Jefferies' analysis.