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China Generic Drug Plan Could Save $30 Billion: Novartis

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China’s ambitious program to cut generic-drug prices may save as much as $30 billion, funds that could be used to pay for newer, innovative medicines, according to the head of pharmaceutical giant Novartis AG.

China has become “much more aggressive about genericizing older classes of medicines,” Novartis Chief Executive Officer Vas Narasimhan said in an interview at the company’s headquarters in Basel, Switzerland.

Until recently, multinational companies waited years to get China’s approval for new drugs, while local generics makers thrived on selling knock-off versions of older medicines. Amid an expansion of health care coverage, the trial of a centralized generic drug-buying program for 11 major cities forces companies to bid for contracts, driving down prices by as much as 90%. That could save the country $20 billion to $30 billion, Narasimhan said.

(Related: How China Is Trying to Cut Its Drug Bills)

Policymakers in other parts of the world, including California, have been thinking about organizing similar types of large-scale drug buying programs.

(Related: New Calif. Governor Proposes Middle-Income Health Premium Subsidy)

Novartis aims to more than double its sales in China over the next five years and get more of its drugs included in national health insurance as the country speeds up approvals. The Swiss pharma giant last month expanded a collaboration with Chinese WeChat operator Tencent Holdings Ltd. and is scouting for new business opportunities in the country, partly focused on data.

“China is undergoing a fundamental shift in its biotech sector,” Narasimhan said. “The key is a pivot to innovation. The country is now having approval times that are under a year that are competitive with any global regulator.”

A decision to allow data from trials conducted overseas, abolishing a requirement for companies to repeat their drug tests in China, “changes the game,” he said. Novartis’s Cosentyx won Chinese approval this week to treat psoriasis, which the company said afflicts more than 6 million people there.

Cosentyx is the first biologic drug on an urgent-needs list of medicines that the government wants to accelerate to market, Eric Hughes, global development head for immunology and dermatology at Novartis, said in a separate interview.

“The regulatory landscape has really changed,” Hughes said. “I’ve been working in and out of China for 15 years. This is the first time I’ve really seen change happen like this.”

—With assistance from Rachel Chang and Dong Lyu.

— Read Cheaper Insulin Could Cut Hospital Bills by $5 Billion: Yale Researcheron ThinkAdvisor.

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