Manufacturers

Understanding China and Hong Kong’s Healthcare and Pharmaceutical Markets

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The value of China's pharmaceutical market-the second largest in the world following the US-is expected to exceed $315 billion by 2020 (a 650% increase from $48 billion in 2012), making China the country of focus in the Asia Pacific region for many healthcare companies.1 Hong Kong, on the other hand, ranks outside the top 15 pharmaceutical markets in the world. While Hong Kong is now part of China, the pharmaceutical markets are regulated separately, and the pricing and reimbursement processes are also independent. In this article, we will explore a selection of the key developments in each market.

Hong Kong Pharmaceutical Market
Hong Kong has a highly efficient system with heavily subsidized hospitals that provide treatment at no or minor cost to its residents. Hong Kong spends approximately 5.2% of its gross domestic product (GDP) on its healthcare, which is in the lower quartile compared to the Organization for Economic Co-operation and Development (OECD) countries.  Hong Kong's publicly funded healthcare has remained good value for the money.2

The Department of Health in Hong Kong is responsible for supervising the efficacy, safety, and quality of all medicines. The 2 types of regulated medicine are Chinese medicines and non-Chinese medicines. All medicines need to be registered with the Pharmacy and Poisons Board (PBB) before they can be sold in the market.3 In order for a drug to be registered in Hong Kong, marketing authorization approval is needed from at least 2 International Conference on Harmonization (ICH) countries, which include the US, Europe, and Japan. All documentation for approval in the reference country needs to be submitted to the Department of Health to gain approval for use in Hong Kong.4
 
Chinese Pharmaceutical Market
The healthcare system in China is continually being reformed as new policies and regulations are formulated and implemented while the government works to meet the growing healthcare demands of its substantial population. China has 1.3 billion people living in the country's rural and urban areas. One of the goals of the reforms is to provide better access to pharmaceuticals in both the rural and urban areas.
 
Pharmaceuticals (drug and biologics) are regulated by the Center for Drug Evaluation within the State Food & Drug Administration (SFDA), which functions in a similar manner to the US Food and Drug Administration (FDA). There are 2 drug registration pathways in China: a new drug application, and an import drug license. In order to receive marketing authorization for a new pharmaceutical in China, clinical trials must be conducted in a Chinese population to generate local clinical data. There are also 2 clinical development strategies to gain drug approval: a sequential development pathway, and a parallel development pathway. Sequential development of drug import approval requires marketing authorization in a reference country outside of China before the product can gain approval in China; this process usually takes between 5 and 8 years. Parallel development can shorten the approval time by 3 to 5 years, and clinical trials can begin in China after the pharmaceutical has been tested in phase II studies outside of China.5
 
China has a number of health insurance programs to help cover its citizens. The Urban Employee Basic Medical Insurance (UEBMI) covers employed urban residents, the Urban Resident Basic Medical Insurance (URBMI) covers unemployed urban residents, and the New Rural Cooperative Medical System (NRCMS) covers the rural-living population. Together these insurance programs cover approximately 95% of China's population.
 
Access to pharmaceuticals is a key component of the reforms in the last decade. The maximum retail price of reimbursed pharmaceuticals is controlled at the national level by the National Development and Reform Commission (NDRC). However, each province in China has an NDRC counterpart that is responsible for setting pricing as well, a Provincial Development and Reform Commission (PDRC).
 
In 2013, the government expanded the Essential Drug List (EDL) formulary by adding 213 more pharmaceuticals to the original 2009 formulary list for a total of 520 (including different formulations). In May 2014, the NDRC also established the National Low-Priced Drugs List (NLPDL), which has 1,154 drugs (including different formulations). The provinces are also allowed to negotiate with manufacturers to supplement the drug lists. The policy aim of introducing these lists has been to improve qualitative and quantitative access to pharmaceuticals for the Chinese population.
 
Biosimilars in China are considered new chemical entities; thus, the SFDA requires new clinical trial evidence for each new indication, which is different from the situation in Europe or the US. While there have been numerous erythropoietin and granulocyte-colony stimulating factor (G-CSF) biosimilar products in China and they are on the reimbursement list, the newer biosimilars of infliximab, etanercept, and trastuzumab have also started to appear in China and are gaining reimbursement at the provincial level. This is an emerging area of pharmaceutical policy reform for China, and the pricing and access for new biosimilar products remains a challenge.
 
Implications to Manufacturers
While Hong Kong and China are closely related, the countries do not share a healthcare technology assessment process. Pharmaceutical manufacturers looking to introduce their products in China and Hong Kong need to recognize that receiving approval for a product in one country is not a guarantee that the product will receive approval in the other. With increasing interaction between Hong Kong and China, and impending healthcare reform in China, it is essential for foreign manufacturers to have an understanding of each country's regulatory and reimbursement systems.

Authored by: Jasmine Knight, PharmD, MS, and George Papadopoulos, BCs (Hons), GradDipEpi

1 Japsen B. Despite probes, China's drug market to boom to $315 billion by 2020. http://www.forbes.com/sites/brucejapsen/2013/08/01/despite-probes-chinas-drug-market-to-boom-to-315-billion-by-2020/. Published August 1, 2013. Accessed September 19, 2014.
2 Woodhead M. One country, 2 health systems. http://www.chinesemedicalnews.com/2014/06/one-country-two-health-systems.html. Published June 29, 2014. Accessed August 15, 2014.
3 Introduction to drug regulatory system in Hong Kong. http://www.drugoffice.gov.hk/eps/do/en/pharmaceutical_trade/other_useful_information/dru. Accessed July 29, 2014.
4 Tejasvi A. How to get your drug registered in Hong Kong. http://www.biospectrumasia.com/print_article/biospectrum/regulatory/22468/how-drug-re. Published September 26, 2012. Accessed August 12, 2014.
5 Tejasvi A. How to get your drug registered in China. http://www.biospectrumasia.com/print_article/biospectrum/regulatory/22433/how-drug-re. Published September 25, 2012. Accessed August 12, 2014.

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