But the cost for such improvement was gigantic.

Nusinersen, sold under the brand Sprinraza, is the world’s first therapy approved for treating SMA, a genetic disease afflicting an estimated 30,000 people in China, characterised by the loss of motor neurons in the spinal cord and lower brainstem that can result in severe, progressive muscle atrophy and weakness.

The drug, approved in more than 50 countries, used to cost 700,000 yuan (US$110,000) for each dose when it was launched in China in 2019, for a treatment course that lasts a lifetime. Most SMA victims like Du, a housewife, cannot afford the drug.

“The drug [producer], the [charity group] China Primary Healthcare Foundation and the municipal government provided us with some support, cutting the price to 700,000 yuan for six jabs in the first year, but it was still a heavy burden,” she said. “We tried everything, [taking] overdrafts from 11 credit cards and borrowing money from our parents to scrap together 700,000 yuan. We used to worry about raising the next 700,000 yuan because this is a lifelong mediation for Little Mili.”

Good news came on December 3, when China’s National Health Security Administration released its 2021 National Reimbursement Drugs List (NRDL), a compilation of medicines that are eligible for coverage by the nation’s health insurance schemes. Sprinraza was among 74 drugs that were added to this year’s list after Biogen agreed to slash prices by 95 per cent. Biogen was unavailable for comment.

Drugs that make it to the list are eligible for between 70 per cent and up to 80 per cent of their prices paid for by insurance, shifting the cost burden from the patients to the public sector. To get on the list though, price cuts are often required at source.

“Many pharmaceutical companies [aspire] to have their medicines added to the drug list as it helps overcome the multiple access hurdles in one fell swoop, improve patient affordability, and enhance competitive positioning in many cases,” said Bruce Liu, partner at strategy consultancy Simon-Kucher & Partners. “If you take revenue growth after NRDL as an indicator of success, most worked out.”

The latest NRDL, announced earlier this month for implementation on January 1, comprises 2,860 drugs, with 1,486 Western drugs and 1,374 traditional Chinese medicine (TCM).

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Out of the 74 additions this year, seven drugs were added directly, while the remaining 67 medicines for treating a range of maladies from infectious diseases to radiocontrast agents, oncology and rare diseases made it via rounds of price negotiations. On average, prices were reduced by 61.7 per cent before drugs could make it to the list.

Besides Biogen’s Sprinraza, several drugs by Chinese pharmaceutical developers like Jiangsu Hengrui Medicine, BeiGene and RemeGen made it to the 2021 list, Credit Suisse said.

Most branded therapies see a sharp surge in sales volume and revenue after their inclusion in the coveted NRDL, even if they must slash prices to get there, according to analysts such as Liu of Simon-Kucher & Partners, and Clarivate China.

The Swiss pharmaceutical giant Roche doubled the sales of its Herceptin breast-and-stomach cancer treatment, and tripled the sales of its Avastin cancer drug in the two years after their NRDL inclusion in 2017, even after 60 per cent price cuts in each case, Clarivate China said in its In-Depth report released in June.

The evidence shows that steep discounts are worth the while to get on China’s NRDL in a price-elastic market where the median disposable income was 13,120 yuan in the urban areas – even with a 12 per cent increase from a year earlier – and less than half of that in the rural villages.

China’s pharmaceutical market has been constantly growing in recent years. It is estimated to reach US$161.8 billion by 2023 for a 30 per cent share of the global market, compared with 11 per cent in 2018, according to Daxue Consulting’s January report.

But the world’s second-largest pharmaceutical market is highly fragmented, with about 5,000 manufacturers – mostly small and medium enterprises – competing in multiple niches across the spectrum of pharmacology. That has created the room for global pharmaceutical giants like Novartis, Novo Nordisk and AstraZeneca to grab significant shares of the market, the report said.

To give domestic drug producers a leg up, the National Health Services is prodding them to add their products to the NRDL.

“The NRDL has made it possible for novel therapies to gain wide reach across the country for diseases with large patient populations,” said Christian Hogg, Chief Executive Officer of HutchMed (China) Limited, which develops targeted therapies and immunotherapies for treating cancer and immunological diseases.

“We see more domestic companies competing with multinational [producers] in innovative drug research and development, and their footprint in the NRDL has increased with every update,” said Hogg of HutchMed, whose shares are traded in Hong Kong, London and Nasdaq.

The company has two drugs on the list. The first, added last year, was Elunate, used for treating metastatic colorectal cancer. It was China’s third-most diagnosed form of cancer last year, with annual new cases estimated at between 450,000 and 550,000. The second drug to make it was Sulanda, used for treating advanced non-pancreatic neuroendocrine tumours, included in this year’s list.

HutchMed declined to say how much it had to cut prices to make it on the list. It and its partner AstraZeneca decided to hold out with Orpathys, withholding the inclusion of the drug for treating non-small cell lung cancer on the NRDL. HutchMed did not elaborate on the exclusion.

Orpathys is not the only holdout. Fosun Kite Biotechnology and JW Therapeutics, two producers of chimeric antigen receptor (CAR-T) cell therapies, refrained from joining the NRDL even after their medicines were approved by China’s National Medical Products Administration. Their products are for treating adult patients with relapsed or refractory large B-cell lymphoma.

“The price of this therapy in other countries is about 2.5 million yuan,” said a spokesperson at Fosun-Kite Biotechnology, the venture between Shanghai Fosun Pharmaceutical and California-based Kite Pharma. “Our product [priced at 1.2 million yuan] is a completely innovative product, and its price is the lowest in the world.”

JW Therapeutics, a venture between the US drug giant Bristol Myer Squibb’s Juno Therapeutics unit and China’s Wuxi App Tech, is in no rush to join the NRDL after missing the inclusion deadline by two months.

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“We are delighted if our product is to be reimbursed by the government; this is on our wish list,” said James Li, Chairman and CEO at JW Therapeutics.

The crux of the matter may be the gaps in expectations and forecasts between current prices and sales, and future prospects. That puts the NRDL’s regulator and drug producers at odds in their negotiations for inclusion.

“Innovative drugs have bigger risks, and cell therapy is a new concept that saves lives but is expensive to make,” Li said. “Investors expect returns from their investments, so we have to be profitable in certain years, and we can’t cut prices at the current stage. There is a disconnect between the government’s targeted price and what we are able to offer.”

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To be sure, the NRDL is not the sole entry point into China’s market, as private insurance and support from municipal governments are stepping up to provide access to drugs, analysts said.

“NRDL is a voluntary process as companies may opt out if [they think] the business case does not make sense,” said Liu of Simon-Kucher & Partners. “In most cases, it does though.”

Fosun and JW Therapeutics said they have cooperated with private insurers that include their products into their schemes.

Local governments also provide patients with customised medical insurance schemes, in conjunction with insurance companies. That supplements the reimbursements for medical expenses for illnesses, analysts said.

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In Suzhou in eastern China’s Jiangsu province, the local medical insurance includes CAR-T therapy drug protection, which is reimbursable up to 70 per cent, according to Fosun. Local authorities can consider widening the pool of capital in the system for better access, JW Therapeutics’ Li said.

For Du Jia in Maoming, the financial burden on her son’s SMA jabs has mostly eased, with the inclusion of Sprinraza on the list of insured drugs.

“The drug will now be sold at 33,000 yuan per jab,” she said. “With coverage by public insurance, I expect to pay 30,000 yuan to 40,000 yuan a year for the three jabs that Little Mili needs in the second year of treatment. I really want to thank the government for putting the drug on the list.”