Pricentric Insights: China Issues New Volume-Based Procurement Policy Document

Date: February 2, 2021 | Country: CHINA | Region: ASIA & SOUTH PACIFIC | Type: Tender | Keywords: #bidding #bmi #centralizedprocurement #generics #gqce #hospital #nrdl #orphandrugs #payment #policy #purchaseagreement #volumebasedprocurement

PRICENTRIC BRIEF:

  • China’s State Council has published an updated policy document on its centralized volume-based procurement (VBP) scheme entitled “Opinions on Promoting the Normalization and Institutionalization of Centralized Volume-Based Procurement of Drugs” that offers up ways to improve its practice and provides a roadmap for the future of this scheme

 

THE DETAILS

BEIJING, China – China’s State Council has published an updated policy document on its centralized volume-based procurement (VBP) scheme entitled “Opinions on Promoting the Normalization and Institutionalization of Centralized Volume-Based Procurement of Drugs” that offers up ways to improve its practice and provides a roadmap for the future of this scheme.

The recent policy document further solidifies the adoption of this scheme as standard practice for China, clarifying the trajectory of purchases and its continued expansion from the 11-city pilot – dubbed the “4+7 Tender Trial”—inaugurated in 2018.

China wrapped its third round of VBP in December 2020 and soon plans to conclude round four, which targets 41 products by generic name with 90 specifications. With each go, China has expanded the number of drugs up for tendering, these drugs undergoing average price cuts of around 53%-54%.

 

Increasing Competition, Expanding Tender

Today’s document contains 20 measures across seven areas.

VBP will center on National Reimbursement Drug List (NRDL)-listed drugs with large purchase volume and high purchase value. Eventually, all categories of drugs with clinical need and reliable quality will be purchased through the VBP initiative once they meet an undisclosed quantity or amount. China is even looking to establish a similar mechanism for orphan drugs and medicines experiencing supply shortages.

The document specifies that China will engage in neither protective nor discriminatory practices that could lead to favoritism. As always, the generic name will be used and competition among bidders will drive lower prices. Multiple winners will still be allowed, but any price differences resulting from bidding should be fair and reasonable.

Products that have passed consistency evaluation will not be subject to quality grouping. China intends for drugs of different dosages, packaging, and quantities but with the same efficacy and route of administration to be combined to promote competition and is exploring whether different generic drugs with similar indications or functions can be merged.

 

Quality Generics

Generics that have not been approved in accordance with Generic Quality Consistency Evaluation (GQCE) standards, China’s method to clear and boost domestically-produced generics, cannot be included in combined groups of related medicines if there are already three products in that group that have passed GQCE.

For products that have not been cleared by consistency evaluation, China is exploring whether to establish a comprehensive evaluation system for clinical use based on big data—in principle, no more than two drugs with the same generic name should be grouped.

To further improve VBP, China will verify the base number of drug purchases with medical institution need, figures from previous years, and clinical status. The agreed procurement ratio will be determined according to the purchase amount base and the agreed purchase ratio, with consideration of characteristics of the clinical usage of drugs, market competition, and the number of selected companies who volunteered to participate in the tender. The ratio should be increased to ensure quality and prevent monopolies.

 

Medical Institution Participation

All medical institutions are encouraged to participate in the national procurement scheme and prioritize the use of medicines acquired this way in hospitals. After all, the proposed number of drugs needed through VBP is based on figures from these institutions.

To encourage greater participation in VBP, China will provide 30% of the costs to purchase these drugs upfront through a special fund, and this prepayment will be deducted from reimbursement requests sent to the Basic Medical Insurance (BMI) scheme.

 

Payments and Accountability

While the program is expanding nationally, China is still looking for ways for institutions to settle payments directly with drugmakers, potentially through electronic settlement centers. Settlement is based on the prevailing price achieved through VBP, particularly competitive tendering. All products, whether the innovator or the generic, will receive the same payment.

The onus for ensuring funds are properly used further falls under the ambit of medical institutions, which are not only required to prioritize the use of VBP-procured medicines as previously mentioned but also to promote rational drug use to assure budget limitations are not breached. These goals will be checked during routine performance appraisals as part of China’s push to improve accountability and quality assurance (QA) measures.

The remaining measures discuss ways to improve the management of VBP, including setting up a regional and national network of procurement mechanisms and task the Shanghai Municipal Pharmaceutical Centralized Bidding and Procurement Affairs Management Office with daily work related to joint-procurement.

Learn more about Pricentric ONE and our Global Pricing Solutions!

Contact us with your questions and global pricing needs, and an expert will follow up shortly.