PDG39 CHALLENGE OR OPPORTUNITY? THE EXPANSION OF DRUG VOLUME-BASED PROCUREMENT IN CHINA

Abstract

Aiming to reduce generic drug expenditure, optimize Basic Medical Insurance fund and ensure drug quality, Chinese payer introduced volume-based procurement (VBP) policy in “4+7” pilot cities (4 municipal cities: Beijing, Shanghai, Tianjin, Chongqing and 7 cities: Guangzhou, Shenzhen, Shenyang, Dalian, Xi’an, Chengdu and Xia’men) in 2018. 25 molecules that have passed Generic Quality Consistency Evaluation (GQCE) were selected to participate in the first round VBP bidding process, of which winners are granted 70% of respective market shares (hospital channel) by offering lower prices. This research explored the result and impact, monitored the nationwide implementation in 2019 and predicted the future dynamics of the policy. Through secondary research, we’ve reviewed the price cuts and associated BMI funds saving of 25 molecules in the pilot cities, and conducted qualitative interviews with drug procurement officials, pharma and payers to evaluate the implementation of the policy. First round VBP has successfully achieved its objectives, bringing enormous impact to China’s pharmaceutical industry. Price cuts of the 25 molecules averaged 55%, and, given that the value of 25 drugs in “4+7” cities accounts for around 2% of hospital channel sales, save approximately 1 billion USD combined. Higher cost-effectiveness of generic drugs leaves more funds for the reimbursement of innovative drugs. The first round VBP has been successfully rolled out in 11 pilot cities. Challenges and problems incurred in VBP have been effectively addressed. The first round VBP will be rolling out nationwide from 2020. The government has already selected 33 molecules for second round VBP and the bid winners will be generated on Jan 17th, 2020. VBP policy preserves BMI funds, reduces patients’ economic burden, and leaves more funds for reimbursing innovative drugs. VBP’s rolling out nationwide will bring great opportunities to products that have passed GQCE.