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Abstract
Universal access to insulin remains a global public health challenge mainly due to its high price. After unsuccessful healthcare reforms attempting to lower insulin prices over the past several decades, the novel pooled procurement—also known as the national volume-based procurement (NVBP)was initiated exclusively for insulin in China. The NVBP exclusively for insulin represents a unique approach to conquering the challenges in the pooled procurement many low-income and middle-income countries face. In this paper, we described how the pooled procurement mechanism was implemented for insulin in China. Forty-two insulin products from 11 companies were procured, with a median price reduction of 42.08%. The procurement price ranged from US$0.35 to US$1.63 (¥2.35–¥10.97) per defined daily dose (DDD). The median procurement price per DDD was US$$0.54 (¥3.63) for human insulins and US$0.92 (¥6.18) for analogue insulin (p<0.001), respectively. A total of 32 000 medical facilities participated in the procurement, and the pooled demand for insulin was 1.61 billion daily doses, with an estimated saving of US$2.85 billion (¥19 billion) for the first year of the procurement agreement. Insulin affordability and accessibility improved substantially. This study reveals that the NVBP exclusively for insulin could effectively reduce insulin prices and improve access to this essential medicine. Even though the pooled procurement option looks efficient, its long-term impacts on the healthcare system should be closely monitored.
- Health policy
- Health economics
- Diabetes
Data availability statement
Data are available on reasonable request.
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Summary box
The pooled procurement mechanism for insulin could improve patient access and reduce healthcare expenditure in China and beyond.
Even though the pooled procurement option looks efficient, its long-term impacts on the healthcare system should be closely monitored.
More pooled procurement initiatives should be developed and explicitly piloted for low- and middle-income countries with limited needs.
Introduction
Over 500 million people have diabetes globally, and every 4 in 5 of them reside in low-income and middle-income countries (LMICs).1 2 Between 2000 and 2019, the mortality rates from diabetes increased by 3% globally but increased by 13% in LMICs. However, the mortality rates from other non-communicable diseases (eg, cardiovascular diseases, cancer) decreased by more than 20% during the same time. An estimated 100 million patients with diabetes require some form of insulin.3 Hence, it is vital that patients with diabetes can obtain and afford the life-saving insulin needed for their well-being. Universal access to insulin is one of the critical elements of the WHO’s Global Action Plan for controlling non-communicable diseases.4 In many countries, however, people with diabetes still have no access to human insulin, which was discovered more than a century ago.1 With the fast-growing prevalence of diabetes, particularly in LMICs, ensuring universal access to insulin presents an increasingly urgent global health challenge.5
The global insulin market is highly concentrated, resulting in challenges to lowering prices and improving insulin affordability. Three pharmaceutical companies dominate over 90% of the worldwide insulin market,6 presenting considerable market power in pricing and supply. Unlike many pharmaceuticals, most human and analogue insulin had no associated intellectual property protection and market exclusivities, while biosimilar insulin has been approved in many countries. As of 2016, more than 40 companies manufacture or sell insulin globally.7 To achieve affordable insulin prices, some countries have adopted approaches to setting fair pricing for insulin, such as international reference pricing, value-based pricing or maximum out-of-pocket cost for insulin.8
Pooled procurement, which improves purchasing power and efficiency by pooling financial and non-financial resources, has been identified as one of the pricing policy approaches to managing drug prices.9 In Africa, numerous pooled procurement initiatives for insulin have been unsuccessful so far. The Health Action International (HAI) evaluated the pooled procurement for insulin in LMICs and concluded that pooled procurement could result in lowering insulin prices. However, centralised procurement systems require considerable political commitment and regulatory support.10 The pooled procurement mechanism should address several key issues, such as consolidating purchasing power and strengthening incentives for manufacturers to make lower bids, improving quality assurance of insulin products, ensuring the rational use of medicine and creating a professional network. Possible solutions include establishing a public procurement platform to ensure sources and prices are transparently awarded to each participating member, making financial commitments to ensure the on-time payment for manufacturers and suppliers, harmonising regulatory agencies to facilitate the approval of products, and enhancing the quality assurance system to ensure the quality of products.10 11
After a series of healthcare reforms that failed to reduce drug prices over the years, the novel pooled procurement—also known as the national volume-based procurement (NVBP)—was initiated in China in 2018.12–14 As the world’s second-largest pharmaceutical market, China’s previous rounds of pooled procurement for chemical drugs achieved more significant price cuts, improving bargaining power through pooling purchasing power across the nation.13 The NVBP received an unprecedentedly high political commitment.13 14 As described previously,13 14 under the direct supervision of the State Council, the Working Group—consisting of the National Healthcare Security Administration (NHSA), National Medical Products Administration (NMPA) and National Health Commission —is responsible for overseeing the regulation, evaluating and organising the procurement. The Joint Procurement Office (JPO)—consisting of local representatives from the participating jurisdictions—is responsible for overseeing the implementation of NVBP. The governing structure of NVBP aimed to address the long-lasting fragmented government actions and organisational issues in the drug procurement and supply chain. Second, to ensure the bioequivalence and therapeutic efficacy of generic drugs, the NMPA released a new regulatory requirement for the approval of generic drugs in 2018.15 Generic drugs are required to pass the Generic Consistency Evaluation (GCE). Only drugs passed the GCE could be listed for the NVBP to improve market competition and to balance drug quality and pricing better.13 Third, the procurement volumes were guaranteed for bid-winners to achieve lower drug prices through enhancing volume-price linkage and bargaining power. For example, the bid-winners are guaranteed up to 70% of the drug volume consumed in the previous year. Fourth, to encourage non-proprietary prescribing and utilisation of procurement drugs, the NHSA provides incentives to public medical facilities based on the cost savings incurred from completing the total quota defined in the procurement contract.
Unlike conventional drugs—chemically defined and synthesised molecular entities, biologics and biosimilars, including those manufactured by biotechnology, are more complex in their structures, contributing to the complexity of physical, chemical, biological or microbiological properties.16 Biosimilars are not identical to their originators, patients may have a preference to brand names.17 In addition, the manufacturing process is complex and the construction of new facilities is expensive, which potentially explains the shortage of biomanufacturing capacity globally. Therefore, the procurement mechanism should be designed specifically for insulin. The novel procurement initiatives for NVBP exclusively for insulin were implemented in November 2021 after successfully carrying out five rounds of NVBP procurement for chemical drugs.14 Here, we describe how a pooled procurement mechanism was implemented for insulin in China. In the context of the increasing concerns over insulin access and affordability globally and the WHO’s action plan of universal insulin access,18 China’s NVBP exclusively for insulin may also provide important policy implications for LMICs and high-income countries (HICs).
Overview of pooled procurement for insulin in China
The pooled procurement for insulin was first piloted in Wuhan, Hubei Province. With an average price reduction of 43% reported in the pilot, the pooled procurement was then rolled out across the nation. The JPO released the centralised purchasing scheme for insulins on the Shanghai Sunshine Medical Procurement All-In-One (SMPA), detailing the process for NVBP exclusively for insulin.19 The procurement includes all insulin products approved by NMPA. Based on NVBP for chemical drugs, the procurement mechanism for insulin was further refined with the following unique measures attempted to address the challenges faced by LMICs.
Respect clinical choice and clinical needs
Although several biosimilar insulins have been approved in China, the interchangeability of biosimilar is still questionable due to the scientific and technical complexities associated with the regulation of biologics.16 Switching to biosimilar insulin may raise concerns over safety, efficacy and administration methods.20 Different from chemical drugs, biosimilar substitution was not required for public medical facilities to ensure the continuous use of insulin that was deemed necessary for patients. At the reporting stage, medical facilities projected their future demand for originator and biosimilar insulin based on their usage in the previous year to improve the predictivity of need.
Ensure supply and quality of insulin
The production cycle of insulin is relatively longer than chemicals, therefore, it is difficult to expand production capacity in a short period. To ensure the supply of insulin products, manufacturers or marketing authorisation holders participating in the bidding were required to report their maximum production capacity. The contracted procurement volume should not exceed 50% of a manufacturer’s production capacity. During the 2-year contract, the production capacity of bid-winning manufacturers was monitored by the Ministry of Industry and Information Technology. Manufacturers will be penalised if they fail to supply insulin products as agreed. Furthermore, the NMPA initiated more strict inspection requirements for procured manufacturers to ensure the quality of insulin.
Quote within the same category
Second-generation or third-generation insulin was categorised into six groups by time of action, including mealtime human insulin (regular), basal human insulin (NPH), premixed human insulin (mixed protamine), rapid-acting analogue insulin (aspart, lispro, glulisine), long-acting basal analogue insulin (glargine, detemir, degludec) and premixed analogue insulin (protamine lispro and lispro, protamine aspart and aspart). Products within the same group quoted the same price. The maximum effective bidding price (per 300 IU) was predefined for each bidding group based on the retail price in the previous year. To achieve a price cut of insulin, the tender reached if the bid was at least lower than 60% of the maximum effective bidding price.
Enhance volume-price linkage to improve negotiation power
An award matrix was developed to incentivise price reduction (figure 1). Companies reaching tenders were further divided into four categories ranging from unit A to unit D based on the ranking of their bidding prices. For companies offering the lowest bids in each bidding group, they would categorised as unit A and then be rewarded 100% of the insulin volume reported by the companies. The companies in unit B were awarded 80% of the reported volume, 50% for companies in unit C and 0% for unit D, respectively. For the remaining procurement volumes, the medical institutions that participated in the procurement decided how they were allocated among companies in different units.
Bidding mechanism of the pooled procurement of insulin, China, 2021. NMPA, National Medical Products Administration.
Outcomes of NVBP exclusively for insulin
Eighty-one insulin products approved by NMPA were shortlisted for procurement, which was published on the SMPA.19 Forty-two insulin products from 11 companies were procured successfully (table 1).21 As shown in figure 2, the procurement price ranged from US$0.35 to US$1.63 (¥2.35–¥10.97) per defined daily dose (DDD), which was 40 IU as defined by WHO/HAI,22 with a median price of US$$0.59 (¥3.97). The median procurement price per DDD was US$0.54 (¥3.63) for human insulins and US$0.92 (¥6.18) for analogue insulin (p<0.001), respectively. The procurement price for the third generation insulin was higher than the second generation (US$0.92 vs US$0.57; p<0.001). The price cut ranged from 24.55 to 73.76%, with a median price reduction of 42.08%. Third-generation insulin had higher price cuts than second generation (44.64% vs 40.80%; p=0.07).
Procurement price and price reduction (%) by insulin type in China, 2022*. DDD, defined daily dose.
List of insulins procured in the national volume-based procurement, 2021
Insulin affordability was assessed as the number of daily wages needed by the lowest-paid unskilled government worker to obtain 1000 IU (approximately a 30-day supply).23 Following previous studies,13 we used the annual disposable income by the annual number of working days (250 days) as the proxy for a daily wage for an estimate (¥147.53 per day).24 Overall, with the NVBP, the estimated insulin affordability was improved from 1.63 days’ wage in pre-NVBP to 0.68 days’ wage in post-NVBP (figure 3). After the NVBP, human insulin costs between 0.40 and 0.76 days’ wage with a median affordability of 0.62; analogue insulin costs between 0.45 and 1.86 days’ wage with a median affordability of 1.04. The third-generation insulin costs between 0.43 and 1.86 days’ wage with a median affordability of 1.04.
Insulin affordability by insulin type category in pre-NVBP and post-NVBP. * Insulin affordability was estimated as the number of daily wages needed by the lowest-paid unskilled government worker to obtain 1000 IU. NVBP, national volume-based procurement.
For the actual price, we calculated the volume-weighted insulin price using the Pharnexcloud database—the public-available big data platform that tracks purchases of prescriptions across China.25 As described by previous research,26 the volume-weighted insulin price was calculated for each insulin, and the average price was then calculated for all insulin combined and for different insulin categories separately. With the introduction of NVBP exclusively for insulin, the daily insulin cost fell from around US$2.0 (¥13.46) to US$0.8 (¥5.38; figure 4), consistent with the procurement price. Higher price reduction was observed in analogue insulin than in human insulin.
Change in weighted insulin price in pre-NVBP and post-NVBP. DDD, defined daily dose; NVBP, national volume-based procurement.
To understand the impact of NVBP, we also examined the cost implications based on the procurement price. According to the announcement released on the SMPA,27 32 000 medical facilities participated in the procurement. The pooled demand for insulin was 214 million vials of standard insulin (300 IU), or 1.61 billion DDDs, for the first year of contact.27 Accordingly, it was expected that a total of US$2.85 billion (¥19 billion) were saved compared with the maximum effective bidding price.
Feasibility of pooled procurement for insulin
Our findings clearly illustrated the success of NVBP exclusively for insulin in effectively making insulin more affordable and accessible in China. This provides empirical evidence supporting that the negotiating power could be significantly strengthened by pooling the demand through centralised procurement.9 The pooled procurement initiative achieved considerable price cuts and cost savings for both human and analogue insulin. Recent analyses evaluating pooled procurement in LMICs showed around a 15% reduction in procurement prices.28–30 In contrast, our study reported a higher price cut, suggesting that the concentration of national demand significantly strengthened our negotiating power. The centralised negotiation approach, combined with larger purchase quantities, allowed us to secure substantial price discounts.13 14
The NVBP exclusively for insulin initiative in China sheds light on the challenges worldwide in achieving affordable prices for insulin for all. Insulin prices negotiated through the pooled procurement in China may also impact insulin prices in other countries. Payers were reported to benchmark international referencing prices in their reimbursement decisions, resulting in a gradual reduction in the global insulin price.31 The overall insulin price in China was consistently higher than both LMICs and HICs before implementing the NVBP exclusively for insulin. Data from an investigation comparing insulin prices across 33 Economic Co-operation and Development countries reported that the average insulin cost was US$1.17 in all non-US OCED countries in 2018.26 In Another study accessing insulin prices across 32 LMICs, the daily insulin costs were US$0.20–US$0.63 for human insulins and US$0.78–US$1.73 for analogue insulin,32 slightly higher than the procurement price in China.
The potential impact of cost savings associated with pool procurement is multifold. High out-of-pocket cost is one of the critical barriers in achieving glycaemic control among diabetic patients in LMICs.33 34 Reductions in insulin costs could also improve affordability and medication adherence, leading to improved health outcomes and quality of life.34 35 Considering NVBP can lead to significantly improved medication affordability, patient satisfaction with the healthcare system could also be optimised. A qualitative investigation of patients' attitudes towards NVBP discovered that 71.4% of patients exhibited a favourable attitude towards transitioning to NVBP medications.35 Even in HICs such as the USA, the Inflation Reduction Act was recently implemented, which caps insulin out-of-pocket spending at US$35 per month for Medicare beneficiaries, leading to improved affordability, prescription satisfaction and medication adherence.36 These findings underscored the significant role that NVBP played in enhancing the healthcare system.
The pooled procurement also allows for the reallocation of funds saved from pooled procurement towards other healthcare initiatives. Self-monitoring blood glucose is necessary for glycaemic control, particularly for type one diabetes. In LMICs, however, the affordability and availability of blood glucose testing are still suboptimal, even at health institutions.37 38 With more funding saved from insulin, more effort could be shifted to enhance the accessibility to blood glucose with metres and test strips and to improve the diabetic education system in LMICs.
In 2022, the World Health Assembly set an ambitious goal of achieving 100% availability of affordable insulin and glucose testing strips globally.4 All insulin products procured through NVBP are covered under the national reimbursement drug list (NRDL) in China. In addition, human insulin (NPH, regular and premixed) is categorised as class A in the NRDL with a 100% reimbursement. In comparison, analogue insulin is classified as class B with an up to 70% reimbursement rate. Therefore, the insulin affordability would be lower if paying with health insurance. As the second most populous country worldwide, over 90% of citizens in China have universal healthcare coverage. At the same time, China is confronting unprecedented challenges in ensuring all citizens have affordable access to essential medicines.39 This initial success in pooled procurement for insulin provides a potential solution for containing high insulin prices, which is a critical public health challenge faced by many LMICs.
Suggestions for pooled procurement policies
The success of NVBP exclusively for insulin can be attributed to its distinctive approach, which includes implementing measures such as establishing a connection between volume and price to enhance negotiation leverage, streamlining the efficiency of the drug supply chain and eliminating expenses related to capital and marketing (box 1). Notably, China—the second most populous country in the world—could gain bargaining power by pooling the national needs of the diabetic population. For countries with smaller populations, for example, in Africa, multination pooled procurement initiatives should be sought to improve bargaining power. So far, the pooled procurement initiatives have been unsuccessful in Africa.10 The mechanism of pooled procurement was compared in online supplemental appendix table 1. Therefore, more pooled procurement initiatives should be developed and explicitly piloted for LMICs with limited needs.
Supplemental material
Key features of national volume-based procurement exclusively for insulin in China
Improve the linkage between purchasing volumes and quoting price to encourage price cut for both brand name and biosimilar insulin.
Differentiate price cuts for brand name and biosimilar insulin to meet clinical needs and satisfy patient preferences.
Cover the majority of brand name and biosimilar insulin approved in China to minimise the possibility of clinical substitution.
Boost local insulin manufacturing capacity to ensure supply and access to insulin.
To boost pricing competition, striking a balance with regulatory requirements is crucial; they should be stringent enough to safeguard the population from substandard medicines but not hinder market entry for biosimilar insulin. Our results also disclosed that pricing competition among insulin suppliers is essential, highlighting the importance of biosimilar market entry. It is reported that insulin biosimilars could cost 60%–80% of brand name insulin,40 further reducing insulin expenditures. To improve the efficiency of the pooled procurement mechanism, biosimilars should also be put in the same bidding group with the brand names to encourage fair competition and the lowest bid possible.
Medicine substitutions should be encouraged through legislation, treatment guidelines and public education. China has started the Joint reformation of health insurance, medical care and drug industry, or the so-called ‘Three Medical Linkage’, to govern the healthcare system more comprehensively. Because human insulin provides similar clinical benefits, health resources should be allocated more wisely by selecting human insulin over insulin analogues, especially in LMICs. According to the WHO guidelines, human insulin is strongly recommended as the first-line treatment for individuals with type 1 diabetes and the third-line therapy for individuals with type 2 diabetes. Insulin analogues might provide additional advantages over human insulin. Still, the critical question is whether it is worth additional costs for patients with insulin access problems or those with no access at all.41
To our knowledge, this study is the first study investigating the effects of NVBP exclusively for insulin on insulin pricing, purchasing and expenditure. It also represents a pioneering effort to elucidate the rationale behind the reduced insulin prices through a comprehensive analysis of cross-national price comparisons. However, several limitations need to be acknowledged. The study may be subject to country comparisons at different times, which may or may not capture the recent change in price.
Data availability statement
Data are available on reasonable request.
Ethics statements
Patient consent for publication
Acknowledgments
The authors thank Pharnexcloud and Pharmacodia for data access.
Supplementary materials
Supplementary Data
This web only file has been produced by the BMJ Publishing Group from an electronic file supplied by the author(s) and has not been edited for content.
Footnotes
Handling editor Seye Abimbola
JY and ML contributed equally.
Contributors Authors have participated in the development and implementation of national volume-based procurements in China. JY is a pharmacist by training who specialises in pharmaceutical policies. ML is a health economist who performed a range of projects evaluating the value of medicines. XJ is a PhD candidate who specialises in health economics and pharmacoeconomics. ZKL is a health economist who conducted various projects evaluating the economic burdens associated with medications in the USA. JY, ZKL and ML conceived the work and contributed substantially to the concept and study design. JY, ZKL and ML wrote the draft of the manuscript. JY, ZKL, ML and XJ revised the manuscript.
Funding The authors have not declared a specific grant for this research from any funding agency in the public, commercial or not-for-profit sectors.
Competing interests None declared.
Provenance and peer review Not commissioned; externally peer reviewed.
Supplemental material This content has been supplied by the author(s). It has not been vetted by BMJ Publishing Group Limited (BMJ) and may not have been peer-reviewed. Any opinions or recommendations discussed are solely those of the author(s) and are not endorsed by BMJ. BMJ disclaims all liability and responsibility arising from any reliance placed on the content. Where the content includes any translated material, BMJ does not warrant the accuracy and reliability of the translations (including but not limited to local regulations, clinical guidelines, terminology, drug names and drug dosages), and is not responsible for any error and/or omissions arising from translation and adaptation or otherwise.