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GBI Health

GBI Health

During my time as managing editor at GBI Health in Shanghai, China, I led a team that produced daily newswires, weekly policy analysis and a monthly print publication, the China Pharmaceutical and Biotechnology Review. Our news products covered topics across China’s healthcare landscape, including government policy, clinical research and development, biotechnology, national insurance programs, and more. Featured below are excerpts from two issues of the CPB Review.

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Mount Up! Galloping into the Year of the Horse

In with the Horse, out with the Snake. The dawn of a new lunar calendar presents us with an opportunity to take stock of China’s ever-maturing healthcare industry. Major progress in delivering healthcare to Chinese patients continues to largely overshadow the occasional regulatory or industry hiccup, though regulators and industry often measure “progress” by a different rubric. As we bid farewell to the Year of the Snake, GBI Health takes a look back at some of the major healthcare events and contemplates their impact as we take the reins to head into another year.

From command to demand?

As ever, rumors abound. Last fall, the National Development and Reform Commission let slip that it was mulling a major shift in the way it prices pharmaceuticals. True to form, the details of what such a reform might look like remain characteristically hazy, but the phrases “benchmark pricing” and “reimbursement ceilings” continue to bob near the surface. This could indicate that China intends to pull back on driving healthcare savings through NDRC-imposed price caps, which, some would argue, haven’t always been in touch with on-the-ground economics. This would mark a major pivot away from a communist-style command economy towards one more market-based.

In the wake of such a reform, a model could emerge similar to those found in Europe, and to a lesser extent what is found in the US, wherein the payer communicates to the hospital (and therefore the manufacturer) what prices they are willing to reimburse, and under what circumstances. (For example, only reimbursing for certain drugs once other options have been exhausted and medical need is demonstrated.)

In the discussions currently circulating, one method would be that the government is willing to pay a given amount for a given compound under a given circumstance; if the patient opts for a more expensive drug above that ceiling, they can bear the extra cost. Such a system could find well-off patients opting for established brands over cheaper domestic generics, while less financially-sound patients would likely go with something fully-reimbursable. 

Significantly, this would theoretically shift pricing responsibilities from the NDRC to the Ministry of Human Resources and Social Security, which administers the national health insurance plans. Insurance reform is a 2014 priority all the way up to the State Council, particularly the further integration of the three major insurance programs and the continued roll-out of major-disease insurance. Although any integration of such a plan is likely a long way off, it would be no surprise to see small-scale pilots emerge over the course of 2014 – particularly those relating to major diseases, where on-patent and high-cost drugs are commonplace. Until such pilot programs emerge or comprehensive reform is announced and enacted, however, industry watchers will continue sifting through the tea leaves.

MOH mulls privatization (again)

Longtime voyeurs of the China healthcare industry will remember the first foray into private hospital development, and none too fondly. That effort floundered and left a sour taste in the mouths of investors and patients alike, largely because of a single lynchpin: limits on physician mobility. Single-site licenses tied doctors to public hospitals where professional promotion and academic advancement kept the best and brightest from relinquishing their posts in public hospitals for the comparatively stagnant private sector.

As healthcare officials prepare to jump back into privatization, single-site licensing restrictions have been increasingly loosened on a regional basis, though private hospitals may not have been the driving force behind the policy shift: pilot programs for multi-site physicians were often designed to increase the quality of coverage at rural community health care clinics, a crucial component of the most recent wave of medical reforms. Additionally, some of the other policies that held the private sector back the first time around – equity ratio limitations, caps on stake for foreign investors, and the general bureaucratic woes that surround the flow of foreign capital in China – may be less tricky to navigate going forward.

In March, Vice Health Minister Zhang Mao announced a five-point plan for streamlining investment in private hospitals, and equal policy treatment for public and private was a large component of the plan. The blueprint also called for private capital injection in areas where local coverage is lacking, and emphasized that while strengthened oversight will play a role in developing the sector, responsibility for doing so will be delegated to local authorities, eschewing a potentially disastrous one-size-fits-all policy-blanket.

Further regulations were announced through the year, perhaps most notable July’s whopping 11-point guideline for resource distribution and private hospital development. Looking to stay on top of the booming hospital sector, both public and private, the plan called for 20% of all hospitals in China to be privately developed and held by 2015, and mandated that local authorities allow development by corporations, charities, commercial insurance companies and foreigners. It also called for more facilities focused on rehabilitation, geriatric and pediatric care, mental health and institutions specializing in chronic diseases.

Most private development, like that of other industries, has been clustered near the eastern seaboard – 40% of all private hospitals, give or take – and the presence of developed cities, huge populations centers and talented physicians is likely to keep the east an appealing market for investors. But with the encouragement of health authorities on the national and regional level, the focus on less-developed regions of central and western China is likely to pick up pace.

The year also saw several instances of pharmaceutical conglomerates purchasing hospitals, a trend which, if it continues, will see a slew of ethical considerations and conflicts of interest bubble to the surface. As the antibiotic abuse scandal continues to rear its head in hospitals around China, it seems safe to say that financial considerations may have quite a bit to say in the private hospital conversation. Stay tuned for more on this Pandora ’s Box of compliance and ethical issues.

Complacent compliance no more?

The initial firestorm surrounding the genesis of the government’s compliance probe last July – that GlaxoSmithKline had engaged in “wanton” bribery, to quote the Chinese Ministry of Public Security – has long been reduced to embers. International and domestic media gleefully ticked off a laundry list of bribery allegations involving a whole slew of companies, while Chinese security officials brought executives to task on state television broadcasts, but the intervening months have seen a discussion significantly more muted. What began as GSK- and then multinational-centric probe has leeched into the domestic arena, with sales reps from Gan & Lee Pharma and a former Vice President of Sinopharm some recent notables. The investigation still looms above, to be sure, but it no longer dominates the conversation.

While nailing Big Pharma to the wall makes for a nice pelt, the underlying reality of compliance in China is the simple truth that, left unchecked, the system of below-board incentives and under the table payments that has long been the norm is unsustainable for industry and government alike. Though any multinational ultimately charged formally will face huge fines in China – not to mention the judicial arms of the US and UK – this period will likely be remembered as an inconvenient growing pain in a period of otherwise positive growth towards a more developed market where corruption is the exception, not the norm.

More transparency in the medical sector – a la the Sunshine Act in the US – would go a long way towards eradicating illicit physician payments. Besides investigating companies involved in non-compliant practices and squashing incentives for questionable prescribing, Chinese health authorities are tackling the problem at the root in more ways than one, not the least of which is expanding opportunities for physicians to increase their income through legitimate channels. In the face of China’s maturing drug and healthcare industry, the hongbao- fueled Wild West of yore was never going to last forever.


Project 523
Malaria, the Vietnam War and R&D with Chinese characteristics

When the North Vietnamese asked for Chinese help in fighting a drug-resistant strain of malaria that was felling scores of their soldiers in the jungle, they were hoping for a short-term wartime solution. But what they may not have known is that their request would set into motion a research apparatus that would eventually see millennia-old medicinal practices mingling with modern scientific methods, eventually creating a new malaria remedy that reshaped the battle against the ever-adaptable parasite.

The modern history of medicinal qinghao (青蒿) began with a North Vietnamese request for Chinese assistance in battling chloroquine-resistant malaria. The parasite was sapping manpower from the war against the Americans and South Vietnamese as scores of soldiers on both sides perished in the jungle. That China struggled with malaria epidemics within its own borders was no doubt an additional factor, and when coupled with the Vietnamese call for help Chairman Mao and the top Communist brass created an anti-malarial taskforce called Project 523, so named after the inaugural meeting of the project leaders that took place on May 23rd, 1967.

Project 523 was overseen by the General Logistics Department of the People’s Liberation Army and the National Commission of Science and Technology, and operated as a covert military project comprised of teams working at different institutions around the country. Under the regulatory umbrella of the Army, and with Chairman Mao’s blessing, Project 523 was uniquely positioned to avoid the tumults of the Cultural Revolution, a 1966-1976 political and social campaign that sought to purge the country of “bourgeois elements”. During that period, the researchers and scientists involved in Project 523 avoided the fate that awaited many intellectuals of the era – hard labor in the countryside, or worse. The short-term goal of getting a remedy on the battlefield was completed by 1969, but research continued on as scientists continued to search for a more effective cure. 

Looking to the ancient scribes

One team of researchers, led by Tu Youyou at the Academy of Chinese Medical Sciences, focused on combing the bevy of available ancient TCM texts for clues. Qinghao seemed a particularly promising candidate with a long record of medical applications (a text from the 2nd century BC mentions the herb), but Tu’s team was unable to extract the active ingredient with sufficient potency – that is, until an anti-malarial tip from a 4th century medicinal handbook led to the discovery that high-temperature extraction methods were damaging the plant’s active ingredient. Using ether as a solvent and a low-temperature extraction process solved this problem.

The promising results of qinghao were presented at a 1972 Project 523 meeting, and additional researchers ran with the findings – teams of scientists were soon extracting the active ingredient into even purer forms, and eventually Tu and her Project 523 colleagues had isolated the pure substance using chromatography. That substance is called qinghaosu in Chinese, or artemisinin in the West, and by the end of the 1970s clinical trials in thousands of patients were showing astonishing results. Not only was artemisinin eliminating the parasite in p. falciparum and p. vivax, in one study it even cured 131 out of 141 cases of cerebral malaria (a severe complication usually caused by p. falciparum infections). It would still be years, however, before artemisinin took off as a global cure. 

Why so slow, WHO?

 There are a number of theories surrounding the decades-long delay for why artemisinin wasn’t approved by the World Health Organization until 2001, but the answer is likely a collection of factors. In the 1970s, China was still largely isolated from the rest of the world and was incredibly inward looking – the end of the Cultural Revolution, Mao’s death, power struggles, the list goes on – and exporting a homegrown malaria cure outside their own borders was not a priority. Another aspect is that Project 523 was military-run, and the details of the research and results of artemisinin were published anonymously. Additionally, nothing resembling a patent was ever filed for the drug, eliminating the chance for the kind of blockbuster patent-protected profits pharmaceutical companies so crave.

 Though the 1970s marked the beginning of the end of China’s isolation, it would be years before Deng Xiaoping’s economic reforms and opening to the West would allow the kind of down-stream impact that would have Chinese scientists collaborating and interacting with the international community. Whatever the reason, artemisinin waited for decades in a sort of medicinal purgatory, an innovative and effective drug without an international cheerleader.

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