China Healthcare:New national reimbursement drug list released;CSPC,3SBio key beneficiaries

What’s New - On February 23, 2017, the Ministry of Human Resources and SocialSecurity released the long-expected new version of the national reimbursement druglist (NRDL). The NRDL has been expanded by 16.7%, with covered drugs increasedfrom 2,172 in the 2009 version to 2,535, including 1,297 chemical / biological drugs(51.1% of total, vs. 1,140 in 2009) and 1,238 TCM / ethnic drugs (48.9% of total, vs.

1,032 in 2009). NRDL inclusion could be a significant opportunity over the long term,as it should notably improve the market penetration for the drugs being newlyincluded or those seeing reimbursement restriction removed.

Implications for our covered companies - Among the pharma manufacturingcompanies in our coverage, we see CSPC and 3SBio as key benefices: (1) for CSPC:NBP injections, which contributed 14.3% of sales in 2016 (GS estimate) are includedin the NRDL, as well as two oncology drugs - PEG-GS-CSF (Jinyouli) and imatinib(Nuolining); (2) for 3SBio: Yisaipu (anti-TNF fc fusion protein) has been added to thelist as has been Qi Ming granule from Wansheng, and restriction on reimbursementwas lifted for TPIAO (for work injury only). However, Byetta might face morecompetition from DPP-4 inhibitors, which are also covered by the new NRDL.

Luye’s Lipusu is pending national price negotiation, and has not yet been included,while the reimbursement coverage was expanded for Xuezhikang (previouslyinpatient only).

For the rest of our coverage, key new drugs included in the NRDL are: (1)SinoBioharm: four oncology drugs (imatinib, dasatinib, decitabine and palonostrone)and key hypertension drug Yilunping; (2) Hengrui: dexmedetomidine (key anesthesiadrug), imrecoxib (Hengrui’s first novel drug), febustat, and daptomycin (a newlyapproved antibotic); (3) Fosun Pharma: Youlitong (febustat), Youdier (aprostatil) andBangzhi (pivastatin).