China wants commercial insurance firms to invest in the development
of homegrown medicines, Beijing’s latest bid to support its burgeoning biotech and pharmaceutical sector.
Commercial insurers have been encouraged to set up investment funds to provide long-term financing and “pa
tience capital” to nurture the creation of innovative
drugs, according to a document released Tuesday by China’s National Health Security Administration, which overseas its state medical insurance fund.
The 3.5 trillion yuan ($486 billion) fund — which covers medical expenses for roughly 95% of China’s 1.4 billion people — will also set up a catalog of innovati
ve drugs that can be reimbursed by commercial insurers, according
to the document. The list could lead to higher pricing for new, innovative drugs, helping shore up Chinese biotechs’ finances.
Shares of Chinese drugmakers, including Thalys Medical Technology Group, Staidson Beijing Biopharmaceutica
ls Co. and Lepu Medical Technology (Beijing) Co., rallied following the announcement.
Faced with an aging population and limited coffers to pay for expensive new treatments, Chinese auth
orities have for years aggressively negotiated price cuts f
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or innovative drug
s to make them reimbursable through state medical insurance
. Most Chinese currently rely on state insurance to reimburse medicines, while commercial insurers have played a margina
l role in subsidizing drugs.
That’s led to thin profit margins in the mainland for both Chinese and foreign drugmakers, raising concerns that the pros
pect of limited returns could eventually stifle domestic innovation.
Many Chinese firms have sought to develop their new treatments for Western markets through partnerships with global pharmaceutical giants — rather than focus on
China — in part because low prices at home may not allow them to recoup research and development costs.
The stakes are high for China to boost its pharmaceutical companies, many of whom have developed innovative drugs that could rival blockbusters developed by global rivals. Sustaining the sector’s growth — and catching up with the West — hinges in large part on ensuring viable commercial returns for domestic biotechs developing competitive drug candidates.