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Generic Options

A series of incentive measures and new policies have been adopted by the central government and local administrations to promote generic drugs

By Xu Dawei Updated Dec.9

Zeng Yixin, the vice minister of China’s National Health Commission, announced in September that generic drugs which have passed quality and effectiveness tests would be prioritized for inclusion in the recently-updated national list of essential drugs. “Health departments are also encouraged to purchase and use generic drugs,” Zeng added, saying the national list would be adjusted on a timely basis to include newly approved, effective and reasonably priced medicines.  

Just two days before the announcement, Jiangsu Provincial government released 15 new measures to promote research and development of generic drugs to ensure their quality and include them in the national health insurance system.  

In April, China’s State Council began to increase support for generic drugs, with favorable policies. Soon afterward, local governments from Shaanxi, Heilongjiang and Guangxi provinces came up with their own local promotion policies for generic drugs.  

“These measures are not isolated,” said Jiang Rong, a researcher with the National Drug Policy and Medical Industry Economy Research Center. According to Jiang, the new policies represent a continuation of ongoing Chinese healthcare reforms which began in earnest in 2015. Industry insiders say they could have immediate impacts and completely reshuffle the industry.  

Congested Market 
For a long time, the speed of drug approvals in China has lagged seriously, with a whopping 22,000 drugs currently on the waitlist, the most in China’s history. Normally, a generic drug takes three or four years to get to market. The long examination and approvals time lowers significantly the potential income of drug companies and delays consumers from obtaining effective drugs.  

Back in August 2008, the State Council released new policies to reform the approval system for drugs and healthcare equipment. Accordingly, generic drug reform began in earnest with a raft of new policies issued.  

On one hand, a big number of generic drugs are on the waitlist for approval, while on the other hand, the market is congested with more than 187,000 existing drug approvals. Of these approved drugs, fewer than 50,000 are being manufactured, while the rest have not even begun production.  

Take Digoxin, a kind of heart medication. Eleven companies in China have approval to produce it, but only two – including Shanghai Xinyi Pharmaceutical – are doing so at present.  

“For companies, that approval letter is a kind of resource,” said Jiang. One drug company owner, who asked not to be identified, told NewsChina that many enterprises have obtained approval letters, and some even make purchasing deals for these letters. Behind this there are frequent price wars among drug companies over similar products. A significant number of domestic generic drug producers make substandard drugs. At the same time, lack of new packaging material, low quality APIs (Active Pharmaceutical Ingredients – the active substances in drugs), outdated manufacturing techniques, and a defective quality control system haunt the industry. As a result, the gross profit rate is less than 10 percent, far lower than the overall international standard of 40 to 50 percent.  

“Domestically, in the past there was no regulation requiring generic drugs to match the brand-name drug. Drug producers were certified as long as they followed domestic standards,” Jiang Rong told NewsChina. He said generic drugs have little chance of replicating the brand drugs. “Initially, generic drugs may copy brand drugs, then generic drugs themselves are copied two or three times, which results in deteriorating medicinal effects one generation after another.”  

Domestic quality is below Western standards in most cases. In the US, regulations require the total quantity of five kinds of impure elements in Azithromycin, an antibiotic, should not exceed 0.1 percent. But in China, there is only one overall impurity requirement.  

On July 5, the European Medicines Agency (EMA) announced it had launched an investigation into Valsartan, a drug used to treat high blood pressure and heart failure. Valsartan used an active pharmaceutical ingredient (API) from a Chinese supplier, Zhejiang Huahai Pharmaceuticals, after batches were found to be contaminated with a potentially cancer-causing substance.  

The EMA said the contamination would have occurred as a result of “a change in the manufacturing process.” The substance, N-Nitrosodimethylamine (NDMA), is an organic chemical from a family of potent carcinogens. An official from the Jiangsu Provincial medicine supervision department told NewsChina that pharmaceutical companies often pay little attention to potential carcinogens in medical research in China as there are no domestic standards on this.  

The National Drug Safety 12th Five-Year Plan (2011-2015) clearly put forward enhancing the quality of generic drugs and launching a scheme to evaluate them. On March 5, 2016, the State Council distributed guidelines on generic drug quality and evaluating effectiveness, the starting point for nationwide evaluation of generic drugs already on the market.  

This means the generic drugs already approved must have the same quality and effectiveness as brand name drugs. On May 28, 2016, the former State Food and Drug Administration (SFDA) released a pending list of 289 kinds of drugs to obtain such an evaluation.  

“This is indeed a correction of past mistakes,” said Sun Zhongshi from the Center for Drug Reevaluation at the China Drug Administration. Sun told NewsChina that generic drugs all require evaluation, regardless of whether they are high or low-end products, in order to improve the quality of generic drugs and chip away at the dominant position of brand drugs. 

Cutthroat Competition 
The former SFDA required 289 kinds of generic drugs to complete these evaluations by the end of 2018 or fail to receive a registration certificate. The requirement involves some 1,800 drug producers.  

So far, 95 kinds of drugs have passed evaluation. “In Jiangsu, up until now, the pass rate has been about 10 percent,” Wang Zongmin from Jiangsu Provincial Food and Drug Administration told NewsChina. Wang said there were around 300 generic drug producers in Jiangsu, and a total of 1,100 approvals would be re-examined during this round of evaluation. “By the end of this year, the best case scenario is that maybe 100 approvals will pass the exam,” he added.  

Sun Zhongshi estimated that around 60 percent of the approvals inside China would be eliminated. “But the overall market will not shrink,” he claimed. Statistics from the China National Pharmaceutical Industry Information Center suggest that by 2020, China’s generic drug market could be worth some 1.4 trillion yuan (US$206b).  

The generic drug industry faces cutthroat competition as new approvals speed up and evaluations continue. According to national rules, once three producers of the same kind of drug have passed evaluation, drug procurement will not consider other kinds of drug that have not yet passed. That means other producers of the same kind of drug will be locked out of the market if they don’t hurry.  

On August 17, the Jiangxi provincial drug purchasing service platform announced it would adjust online purchasing qualifications, claiming three producers of Amlodipine, a blood pressure control drug, have passed, and that other producers would be eliminated from the platform.  

A technical director from a drug producer in Lianyungang, Jiangsu Province, told NewsChina it was a financial challenge for most drug producers to maintain high-quality manufacturing and management of all the kinds of drugs that it produces.  

“The purpose of the evaluation is to reduce the number of generic drugs, and raise the quality of the drugs, so a reshuffle of the market is unavoidable,” said Wang Zongmin, director of the Drug Registration Management Department of Jiangsu Provincial Food and Drug Administration. According to Wang, the ongoing evaluation will not lead to a shutdown of small- or medium-scale drug companies, since they can still produce other drugs not included in the national list of essential drugs. 

No Time to Rest 
But producers of generic drugs that have passed evaluation cannot sit back and relax. Generic drugs are often shunned by public hospitals, and it can take a long time for them to be included on an individual hospital’s prescription list.  

After a drug is included on the local online list for hospital purchasing, the hospitals must hold a drug affairs conference and adjust their own purchasing lists. Only then can doctors prescribe it. The whole process can take years.  

In February 2017, Qilu Pharmaceutical released a generic Gefitinib tablet onto the market. After obtaining approval, the cancer drug was evaluated and found to have equal quality and effectiveness to the brand name version. But there was more waiting while hospitals held drug affairs conferences.  

Doctors also shun the drugs. Due to their tarnished reputation, many doubt the usefulness of generics. One industry research report found that of 2,185 doctors surveyed, 87.5 percent believed imported brand name drugs were of higher quality than local generics, and a withering 1.1 percent of participants had more confidence in domestic generics, while about 7.8 percent of the participants think the two are the same.  

One doctor from Nanjing Medical University Hospital told NewsChina that doctors prescribe drugs based on the drugs themselves. Some domestic generic drugs are simply not effective, they said: “We dare not risk patients’ health.”  

There is at present no policy compelling hospitals to prioritize purchasing generic drugs, which has posed a hurdle for generic drugs to replace brand name drugs in clinical settings. A document released recently by the Jiangsu Provincial Government Office vowed to reform supply and adoption of generic drugs, stating the health department would enforce their adoption and require doctors to prescribe drugs based on the drug name rather than the brand name.  

Another key aspect of the push to replace brand name drugs with low-cost generics is reforming China’s health insurance payment system. Consistency evaluation could make possible equal health insurance payment for drug with the same China-approved drug names no matter if they are brand name or generic drugs. “A patient then could only get an equal reimbursement through health insurance no matter whether they are branded or generic,” Jiang Rong said.  

Take the cancer drug Gleevec as an example. The price for a pack of this drug (which typically lasts a month) is 13,400 yuan (US$1,954) while the price of a pack of Xiwei, a generic version produced by Jiangsu Hanson Pharmaceutical Co. Ltd. is 1,499 yuan (US$219).  

According to the 70 percent reimbursement rate of existing health insurance policies, patients who purchase Gleevec are reimbursed 9,380 yuan (US$1,369), while those who purchase Xiwei are only reimbursed 1,049 yuan (US$153).  

“So if a standardized reimbursement could be set up, say 2,000 yuan (US$292), people would need to pay 11,000 yuan (US$1,605) for Gleevec but nothing for Xiwei,” explained Wang Zongmin with Jiangsu Food and Drug Administration.  

Wang Yue, deputy chief of the Jiangsu Provincial Food and Drug Administration, told NewsChina that healthcare insurance should start from the market, and reflect personal payment ability and consumer willingness. “The national healthcare plan should focus on fulfilling basic needs and securing drugs’ availability to the general public,” Wang added.  

In Jiang Rong’s opinion, to contain surging healthcare insurance expenditure, the key is to reduce spending, and a transition from percentage reimbursement to fixed-amount reimbursement for drugs should be considered.  

“Whether consistency evaluation becomes a one-time thing will be decided by the implementation of follow-up policies,” said Kong Xiangsen of Jiangsu Food and Drug Administration’s Drug Registration Department. Kong says the supply of generic drugs, pricing and related healthcare insurance policies will together decide the final outcome of the reforms.