Goodwin Attorneys Discuss How Foreign Companies Can Break Into China’s Biosimilar Market

February 20, 2021

Huiya Wu, JD, and Freddy Yip, PhD, PCLL, attorneys at Goodwin Procter, discussed projections for the Chinese biosimilars market and the potential for foreign companies to get a share.

The Center for Biosimilars® (CfB): Hello, I'm Matthew Gavidia. Today on the MJH Life Sciences™ Medical World News, The Center for Biosimilars® is pleased to welcome Huiya Wu, JD, an expert with 20 years of intellectual property litigation experience based in Goodwin Procter's New York office, and Freddy Yip, PhD, PCLL, a molecular biologist and specialist in product licensing, [initial public offerings], and mergers and acquisitions who is based at Goodwin Procter's Hong Kong office. Great to have you both on.

CfB: Addressing regulatory and policy type topics, what's driving biosimilar growth in China and what role does the national reimbursement list play?

Yip: We believe there are 4 major drivers for the biosimilar growth in China. The first driver is the understaffed medical needs in China. For example, China's oncology population is increasing at a faster pace than in the United States, but many patients in China still cannot afford the high costs of biologic treatments, which generally have superior efficacy. So, biosimilars with price advantage provide patients in China with affordable, effective treatment options.

The second driver is the fact that many blockbuster biologics are coming off patent. The top 10 Global blockbuster biologics drugs in 2019 contributed to almost 30% of the total sales revenues of the overall biologics market, and many of them face loss of exclusivity over the following years. As of today, at least 5 out of the 10 best selling biologics no longer have patent protection. So, the expiration of patents and other IP [intellectual property] rights for the generated biologics opens up the opportunities for biosimilars to enter the market in China.

The third driver is the improved regulatory environment in China. So, China has been striving to establish clear regulatory pathways to ensure market access to qualified biosimilars. The biosimilar guidelines released in 2015 have set up the biosimilar development and registration regulatory framework in China. The regulations of R&D [research and development] and the regulatory pathway for biosimilars in China will continue to become increasingly clear and well defined, which will allow more biosimilars to quickly get into the market.

The last driver is the national reimbursement list. It makes expensive drugs more affordable. So, the list includes a list of therapies that are partially if not fully reimbursed for eligible patients in China. The list comprises 2 drug catalogs: List A and List B. Whereas List A generally includes low-priced and clinically necessary drugs that are fully reimbursed, List B consists of higher priced or new drugs, which generally requires a 10% to 30% copayment from the patients. Since 2017, a number of biologics have been added to the list. That includes rituximab [Rituxan], trastuzumab [Herceptin], and bevacizumab [Avastin]. As a result, the proportion of patients’ self-payment on those drugs decreased to approximately 10% to 30% of the previous figure. So, as more biologics are included in the international reimbursement list, the affordability of biologics it's expected to increase, which allows greater market access.

CfB: How does the Chinese government feel about protecting innovators' rights to recoup profits vs the public's right to affordable medicine?

Yip: The new patent law will provide for patent term adjustment and patent time extension, which gives more time to innovators to record profits. It shows that the government is encouraging innovation. On the other hand, the introduction of the biosimilar guidelines in 2015 encourages more companies to bring biosimilars to the market as soon as the originator's patents have expired. So, it also shows the government commitment in allowing more affordable drugs to enter the markets.

CfB: Moreover, how might China's regulations affect the breadth of molecule types that enter the market?

Yip: So, chemical drugs in China are still the largest segment in China's pharmaceutical markets. The reforms of the drug regulatory system since 2017 have benefited not only the biologics but also chemical drugs in general. That said, the chemical drug segment experienced significantly lower growth rates compared to that of the biologics, partly because of increasing R&D investment on biologics, increasing affordability of expensive biologics, which I’ve just mentioned, and also superior efficacy of biologics. And if we compare original biologics with biosimilars, the biosimilar market is expected to grow at even a higher rate than the biologics market. This is driven by the factors that we mentioned previously.

CfB: What does an originator company need to do to launch its product in China and can a biosimilar company launch even if an originator's product is not available in China?

Yip: Since China has joined the ICH [International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use] in 2017, and started to accept data from overseas clinical trials, drug companies could leverage the clinical trial data obtained overseas and skip certain trials in China when they seek to apply for marketing authorization. For drugs that are on their priority lists, if there is no ethnic difference in the clinical study [trial enrollees represented Chinese ethnicity], the drug companies can even submit the clinical trial data obtained overseas and directly apply for a drug listing registration. So, the process is a lot easier nowadays for foreign companies to bring their drugs to China.

A biosimilar company cannot use the biosimilar goods to launch a product if an originator’s product is not available in China because the NMPA [National Medical Products Administration] does not establish an innovative biologic approved by foreign regulatory authorities (for example, the FDA) as a reference drug. The reference drug must be approved in China by the NMPA at the time of the comparative clinical studies of the biosimilars.

CfB: Why has China worked so hard to upgrade its drug regulatory structure?

Yip: In 2015, the Chinese government launched the "Made in China 2025" mega policy with the goal of elevating China's pace of innovation and quality of production. The mega policy cites both biopharma and medical technologies among the 10 strategic industries that will be the focus of continuing government support. So, these industries have been targeted specifically for domestic innovation and policies and initiatives are expected to receive further support from the government.

CfB: When it comes to biosimilars, the Chinese government seems to be putting a lot of pressure on itself. Can you discuss why?

Yip: I believe there are 2 reasons. First of all, historically, the availability of overseas approved therapies in China has been limited. For example, out of 55 oncology drugs launched globally from 2012 to 2016, only 9 were available in China in 2017. So, the lack of available medications is particularly acute with advanced therapies, such as biologics and antibodies. That's 1 reason why the Chinese government was so eager to reform the regulatory system to accelerate the innovative drug approval process.

The second reason is that China has been facing a rapid increase in health care expenses due to increasing prevalence of, for example, cancer and lung diseases, and also the extended average lifespan in China. So, China has been looking for solutions and taking a proactive approach to solving this problem, including developing alternatives to expensive branded drugs. So, generics and biosimilars offer attractive solutions.

CfB: And lastly, do either of you have any concluding thoughts on the China market for vice most?

Yip: Yeah. So, for me, considering the introduction of the new biosimilar guidelines and the number of clinical trials of biosimilars that are being conducted in China, we expect that the China markets will continue to grow. In fact, it is expected that the size of the biosimilars markets 10 years [from now], will be at least 10 times bigger than that in 2020. However, we do expect that the market for first generation biosimilars will rapidly become crowded. So, the biosimilar companies will start to focus on lowering the manufacturing costs and develop more efficient distribution networks in order to maintain their profit margins. Huiya, what do you think?

Wu: I agree with what you said, and in terms of our discussion of this proposed linkage system, it will be interesting to see what impact it has on this growth that you've described in the biosimilars market. Given some of the uncertainties with regard to what patents might be asserted, we don't know whether injunctions will come into play and potentially slow down the number and pace of biosimilars that come onto the market. We've seen some of the unintended consequences of the 1984 Hatch-Waxman Act that led to some fixes in the 2003 Medicaid Modernization Act. I don't know what some of the unintended consequences might be for this new patent linkage system. And in some ways, one of the big questions I have is are there enough incentives for biosimilars? I think the answer is yes, but it seems to me that some of the more innovative companies in China might be thinking about doing what's called "fast follow-ons" by making slight improvements and then making a straight biosimilar and trying to get a play for some of the benefits that innovative biologics would enjoy in China. So, I'm looking forward to seeing what happens.

CfB: To learn more, visit our website at centerforbiosimilars.com. I'm Matthew Gavidia. Thanks for joining us.