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Comparison of major Asian countries’ reimbursement mechanisms for innovative pharmaceutical products

Published on May 31, 2021 by Raghu Patale

Asia is home to 57% of the world’s population and accounts for around 40% of the world’s pharmaceutical market. It is one of the most challenging pharmaceutical markets due to its disorganised nature. It continues to grow due to increasing populations, market size, ageing populations, and illnesses.

The challenges related to the health technology assessment (HTA), which determines reimbursement pricing, differ from country to country in Asia and are in a nascent stage unlike in most of the developed European countries. For instance, high- and upper-middle-income countries use the HTA to guide reimbursement and coverage decisions. Asia comprises a number of lower-income countries that use the HTA for planning and budgeting purposes.

Most Asian countries do not use pharmacoeconomic evaluations or head-to-head comparison models for setting reimbursement prices for drugs; instead, they rely on external reference pricing and internal price benchmarking for tendering and negotiating prices. Some countries use bridged versions – for example, South Korea also uses QALY/ICER evaluations, and Japan uses cost-plus pricing and a price maintenance premium to determine the prices of innovative drugs. With the level of challenges, updates and complexities in Asian reimbursement models, it is important to understand the differences in the HTA models of these countries. In this paper, we attempt to provide a comparison of the HTA reimbursement mechanisms and decisions to increase clarity.

Parameters

China

Japan

South Korea

Governing bodies

  • NHSA

  • NDRC

  • MOHRSS

  • National Center for Medicine and Health Technology Assessment

  • NHSA

  • NDRC

  • MOHRSS

  • NHI

  • HIRA

  • DBCAC

  • DREC

Reimbursement application

    Cannot submit application; selected by expert panel from HTA

    Yes

    Yes

Exemption from pricing assessment

    List A: essential, inexpensive drugs

  • Products used for rare diseases and paediatric diseases

  • New products with peak sales forecasts of less than JPY5bn

  • Already listed products with peak sales less than JPY100bn

  • If the companies choose to accept a price of 90-100% of the WAP of the substitutes

Timeline

    1.3 years in 2020

Maximum of 90 days from market authorisation

Approximately 240 days

Mechanism of setting reimbursement pricing

  • International reference pricing (IRP) from a basket of 12 recommended countries

  • Price benchmarking with reimbursed alternative product

  • Negotiations and competitive bidding

  • Average of foreign reference pricing from the US, UK, Germany and France

  • Comparative method if a similar drug is already listed

  • Cost-calculation method if no similar drug is listed, based on different operating costs, profits and taxes

  • Reimbursement will be determined by pharmacoeconomic evaluations for a drug that has significant clinical benefits

  • Reimbursed at a price equivalent to the WAP of the substitutes when clinical usefulness is comparable to that of its substitutes

  • Reimbursement is assessed based on external reference pricing for drugs targeting a disease that has no alternatives, such as a rare disease or cancer

Bidding and negotiation

    Yes

No

Yes (negotiation)

Special agreements

    Pay for performance

No

  • Price-volume agreements

  • Risk-sharing arrangements

  • Refunds

  • Money-back guarantees

  • Expenditure caps

  • Fixed cost per patient

  • Reducing price according to the market-based actual transaction price system

  • Reducing the price of the original medicine when its patent expires

  • Pricing of line extension medicines

Post-launch price revision

    For competitively negotiated drugs after a two-year agreement

  • Cost-effectiveness assessment after launch

  • Drug price revision based on market price

  • Re-pricing of products with the largest market shares

  • Actual transaction pricing

  • Pricing of line extension medicines

  • Price cutting of patent-expired originals and generics

Average discount

    50.6% (2020)

    Average cut of 4.4% within a range of 1-9% (2020)

    Median discount rate of the first price cut was

  • 5.0% (range: 0.1-20.0) for PE

  • 3.0% (range: <0.1-30.0) for WAP

  • 5.0% (range: 0.6-10.9) without a CE pathway (2007-17)

For granular details of reimbursement mechanisms in these countries, please refer to the respective links below:

Japan’s reimbursement mechanism for innovative pharmaceutical products

China’s reimbursement mechanism for innovative pharmaceutical products

South Korea’s reimbursement mechanism for innovative pharmaceutical products

Abbreviations:

QALY – Quality-adjusted life year

ICER – Incremental cost-effectiveness ratio

NHSA – National Healthcare Security Administration

NDRC – National Development and Reform Commission

MOHRSS – Ministry of Human Resources and Social Security

NHI – National Health Insurance

Chuikyo – Central Social Insurance Medical Council

MHLW – Ministry of Health, Labour and Welfare

HIRA – Health Insurance Review Agency

DBCAC – Drug Benefit Coverage Assessment Committee

DREC – Drug Reimbursement Evaluation Committee

PE – Pharmacoeconomic

WAP – Weighted average price

CE – Cost-effectiveness

About our Life Sciences Solutions:

Acuity Knowledge Partners (Acuity) has been assisting clients in building strategies for their products to stand out. We combine clinical and commercial insights to develop differentiated strategies. With so many decisions to make – from selecting prospective indications to devising pricing and marketing strategies – we address our clients’ challenges and prioritise our energies to achieve their product launch goals.

In terms of pricing and reimbursement strategies in particular, Acuity can help in understanding of the P&R framework, benchmarking protocols, clinical profile and pricing of the currently reimbursed therapeutic products, enabling better understanding and strengthening of the P&R approach.

Acuity also frequently provides services such as therapeutic landscapes, opportunity prioritisation, lifecycle management, and go-to-market and market assessment. For more information on our capabilities, please visit our Life sciences solutions page


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About the Author

Delivery Manager, PEC BR

Raghu Patale serves as Delivery Manager leading the Life Sciences Corporate Strategy Research and Consulting vertical. His responsibilities include thought leadership, setting up new client engagements, client management, and generating business insights. He has over 10 years of experience in conducting life science research as a competitive intelligence and strategy consultant. He has supported a wide spectrum of client engagements focusing on competitive intelligence, therapy area research, market opportunity assessments, M&A support and report writing in oncology and other therapy areas for US, EU5, and Asian geographies.

Prior to this, Raghu was a Group Manager, leading the Pharma Practice at Evalueserve. He holds a Master’s degree in Pharmaceutical Sciences from the National Institute of Pharmaceutical Education and Research (NIPER).

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