Analysis on the Influence of Policy Factors in Innovating Behavior for Chinese Orphan Drugs ’ Industry

Because of the small target market and poor profitability of Orphan Drug, it is difficult to effectively encourage the R&D and production Behavior of the Industry by the market mechanisms alone. So that, it is necessary to implement the incentive policy for Orphan Drug in order to stimulate the innovative behavior. Basing on the analysis of domestic market and foreign and innovative incentives policy, the paper discussed the policy factors of the innovative behavior for Chinese Orphan Drugs’ industry by the research method of Structural Equation Modeling (SEM), and proposed the innovation incentive path, such as the registered priorities policy, industry-led incentive, new medical reform policy, and the policies collaborative mechanism.


Introduction
Realizing the social justice, caring for the life quality, improving the healthy level of the weaker group, maximizing the social welfare are the social managing issues which should be concentrated on all importantly by all governments of world.Rare diseases, as the typical representative of social weaker group, is difficult to be healed and Ebola hemorrhagic.So pay attention to and assuring the availability of its treatment and drugs is not only concert about the development of the national public care industry, but also closed cling to social homonym and stability.However, Rare Disease is a kind of diseases in the minority, its target market is small and its profitability is weaker.But it is very difficult to effectively encourage the company to R&D yield the Orphan Drug only by the market mechanism.So it is necessary to explore the market guiding mechanism and government arming policy on the innovative behavior of Orphan Drug, to form good policy environment for the technical innovation in China and meet the constantly increasing requirement on health care for masses.

Orphan Drug Market and Policy about New Healthcare Reform
For Rare Disease, since as the disease in the minority, there neither is professional legislation on it.Nor it has been absorbed into 'low lever, broad coverage' healthcare insurance system.But some local government has done some significative institution searching on the guiding policy of Rare Disease or Orphan Drug.

Orphan Drug Market
After enter into 21 century, although the national healthcare level of masses has been improved continuously, because being regard as the disease in the minority, there is short of the practical treating way and drug for Rare Disease.The phenomenon of "suffering poor due to illness or the illness causing the poor" happened frequently in medical treatment and care field.On one hand, there is no professional legislation on Rare Disease; the distribution of the Rare Diseases and market supply level of the Orphan Drug is still uncertain.on the other hand, the encouraging mechanism to the innovative behavior on Orphan Drug is not formed; Till January of 2012, only few kinds of Rare Disease such as the Pompey can treated by practical drugs, sharing less than 1% of total number of Rare Disease; There is lower Listed level for Orphan Drugs from USA, Europe, Japan (table 1).According to figures, NSFC has cost 89,358,000.0 RMB during 199989,358,000.0 RMB during -2007, to , to devote to the research of 32 kinds of Rare Disease, 10,000,000.0RMB per year on average.But the USA has had an appropriation of 14,100,000.0USD only in 2010.In the security of Orphan Drugs, Chinese country is far fall behind Japan, south Korea, and Taiwan, also others BRICS, which is not adapt to Chinese national economy development level, especially the short input on R&D must restrain the availability of Chinese Orphan Drugs and innovation initiative of the company.In case of the Deficiency of the institution associated with Rare Disease and Orphan Drug at the national level, some local governments have done some significative detect on the Rare Disease or demand market of Orphan Drug 1994, Shenzhen public healthcare bureau establish the "Chinese Rare Diseases magazine", and now is changed into "Rare Disease", which concentrates on theoretical study, diagnosing and treatment of Rare Disease.In recent years, Chinese CDC (Centers for Disease Control) has start to epidemiology analyses of some kinds of Rare Disease, and establishing national supervisory system of Creutzfeldt-Jakob disease in 2002.In June of 2010, Guangdong public healthcare bureau set up the indemnificatory fun for prevention and treatment of Rare Disease.In November of 2010, the first officially approved prevention and treatment association of Rare Disease, "Shandong prevention and treatment association of Rare Disease" was established formally.In 2011, the expertise branch of Rare Disease was built up by Shanghai medical association

Orphan Drugs and Policy of New Healthcare Reform
The healthcare insurance institution is a system that in a country or region, according to its insurance rule, raises, locates and makes use of the healthcare insurance fund to let masses can prevent or treat the disease.Currently, 4 patterns of insurance institution existed in China including free medical service, urban employees insurance, urban citizen insurance, and new rural cooperating medical insurance.In 2009, the launch of national new medical reforming plan, substantially improve the medical coverage rate of insurance coverage in China.But in this pattern of "low level, and broad coverage" medical insurance, no scheme concert on treatment and diagnose of Rare Disease was proposed.
Currently the patients of Rare Disease in Chinese mainly are confronting with difficulties from 3 aspects.Firstly, high misdiagnosis rate exist for Rare Disease, many patients cannot get correct diagnosis until transferring many hospitals.Secondly, there is no working drug available for most of the Rare Diseases, especially the inherited patients of Rare Disease.Thirdly, the Orphan Drugs are very expensive, even the middle class family can not afford for them, which plays the most important role in those three aspects.Now in China, the basic healthcare insurance is chiefly used pay the drugs and expenditure of treatment and diagnosis which are prescribed within drug category, treatment and diagnosing category, and healthcare facility standard.Usually the Orphan Drug can be concluded in the category of healthcare insurance, so the patients also have to bear the expensive treatment cost although they had taken part in the healthcare insurance.

Policy and Innovation Incentive of Orphan Drug at Home and Board
Not only the Special legislation of Rare Disease is most important unit of healthcare insurance system, there is also some motivation mechanism for the R&D and product in many other countries or regions.But in Chinese, there is barely an institution design that Orphan Drug can enjoy preferred right on registration and approval.Still no incentive mechanism about related industrial guidance and healthcare insurance institution exists.

National Policy about Orphan Drugs in Foreign Countries
In 1980s, the Orphan Drug market is in state of free competition.But the low incidence of the Rare Disease results in the low benefit of Orphan Drug, and getting little attention from governments.Since from 1990s, many countries in the world have started to legislate on Rare Diseases to protect the right of patients and their families.
At recently, In USA, Europe, Japan, their policy systems of Rare Disease and orphan are integrated, including R&D, production, registration and approval, pricing, healthcare insurance, tax, social rescue and so on.
The "Orphan Drug Act" of USA was passed by congress in 1982, and was signed into law on April 1 st of 1983.In 2002, the "Rare Disease Act" and "Diseases Orphan Product Development" was passed which effectively motivate the development of Orphan Drugs and drive the long-term development of American bio-pharmacy.The EU parliament and council get No 141/2000 stature through, which get valid since from April 28 th of 2000.The EU has taken Rare Disease research as one of actions in public health field, and issued the "decision that absorbed rare dieses into public health plan in 2008-2013".Since on April 1 st of 2011, the European Medicines Agency had executed the exemption and deduction for the new Orphan Drugs expenditure.In November of 1993, the Japan formally issued and implanted "Orphan Drug Regulation".Since September of 2003, the orphan drug center of South Korea have start to product and provide drugs and Orphan Drugs information, according to the amendment (law no.6982) of "South Korea act of pharmaceutical affair".

Innovation Incentive Measure of Orphan Drug in Foreign Countries
Most of countries provide the relevant incentives for the product and R&D of the Rare Disease.The most frequent motivation is supplying the protection during the time of market exclusiveness, offering science advisory service for free, giving preferred registration and approval process, funding the R&D of Orphan Drug.Still parts of countries deduct or exempt the tax and expenditure for the R&D and product of Orphan Drugs.
All countries have prescribed time about market exclusiveness of the Orphan Drugs, which is the most working factor that drive the company enter into the orphan market, but the specific time is not different in each country.The market exclusiveness time In American is 7 years, in EU and Japans is 10 years.American and EU provide science advisory service for free, mainly integrating in clinical and non-clinical step of Orphan Drugs (table 2).because of high R&D cost of Orphan Drugs, to promote the R&D of Orphan Drugs, most of countries offer relevant grants or subsidies for research projects, such as "Orphan Drug office of American FDA" and "Japan's national bio-medical innovative mechanism", "EU DG Research".
The motivation method on tax concession for Orphan Drugs includes tax deducting or exempting in clinical cost, R&D and other expenditure.For example in USA, the drugs can enjoy the tax concession if are approved as Orphan Drug.In France the sales promotion tax that the duty company must pay for promotion of Orphan Drug, is reduced.Severer countries have reduced some expense of Orphan Drug.The EU has reduced part of application fee for public license of Orphan Drug.The USA has reduced part of application fee and supplementary application fee for public license of Orphan Drug.

Relevant Incentive Method of Orphan Drugs in Chinese
At present, many countries have issued government guiding policy for the Rare Disease and Orphan Drug, but Chinese seems be slower in formulating incentive method of Orphan Drugs, which mainly focuses on registration and review links.2007, issued "Chinese drug administration act" was issued, and the article 45 stipulates that the new drugs which can work with HIV, cancer, Rare Disease and have clear clinical treatment superiority could get the particular approval for its application.
The "Act of special examination and approval in new drug "issued in 2009 stipulates that take Orphan Drug into arrange of special examination and approval.
The "Act on intensifying the reform of examination and approval to encourage more innovation "issued in 2013 proposes that encourage drug innovation that oriented toward clinical value."The 12 th five-year plan of national drug security" point out encourage R&D of Orphan Drug and children-appropriate dosage.Many policy and law offer system assurance in allowing innovative product of orphan go public fast.The result of impact factor analysis on innovation incentive policy for Orphan Drug with description statistic (table 4) show that the mean value of impact factor concerning on drugs' registration and approval institution is lower, the standard deviation and coefficient of variation is higher, reflecting that insiders have dispersed opinion on innovation behavior of Orphan Drugs' registration and approval institution.Comparatively, there is higher mean value for impact factor concerning on industry guiding policy.its standard deviation and coefficient of variation is lower, reflecting that insiders have agreed positive effect of industry guiding policies.For the impact factors concerning on basic drugs administrations, the healthcare insurance institution, and reimbursement ratio in new medical reform, the mean value is lower, its standard deviation and coefficient of variation is higher, which means insider should improve their cognition of relevant incentive measure about new medical reform.Confirmatory factor analysis in the SEM associated with influencing factor of innovation incentive policies for Orphan Drug shows that"χ 2 /df=2.67",all the mean value of CFI, NNFI, GFI, IFI is higher than 0.90, SRMR=0.069,RMSEA=0.081, the analysis result is as follow (table 5) In register and approval institution (Register), the communication mechanism between government and enterprise, the marketing authorization holder system (production license belong to developer), the program steering are the main factors which influencing the register and approval of Orphan Drugs; the facilitated policies of technology and production, government's fixed supplier purchasing, and capital investment of government, are the chief hands of guiding policies of industrialization for Orphan Drugs.Entering into remenbursement list of national or local healthcare insurance plays an essential role motivates the usage of Orphan Drugs.
There is higher path coefficient between "register and approval institution" (Register) and "industrial guiding policies" (Policy), but path coefficients between "new medical reform method" (Medical) and both factors above are lower (table 6), which shows that register and approval institution has strong relationship with industrial guiding policies, has no relevancy with new medical reform method.

Result and Discussion
The result of empirical analysis on incentive policies factors influencing Orphan Drugs innovation show that totally, insiders pay much attention to guiding policies, there is obvious relationship between industrial guiding policies and register and approval system, and the new medical reform measure just has little relevancy with industrial guiding policies and register and approval system.
The register and approval system of Orphan Drug plays a very important part before marketing, positive communication between developer and supervisory section, the marketing authorization holder, design steering of clinical program and such factors influence the marketing and usage of Orphan Drugs.At present, Chinese government has issued some facilitated policies about Orphan Drugs' register and approval system, stimulated the R&D orientation toward purpose of clinical use.But the feature of high R&D cost and small market demand still can not motivate technology innovation of Orphan Drugs companies.In the hand of government's industrial promotion, sun as the technology and production facilitated policies, the fixed suppler purchasing of government, and preferential tax strategy all are closed associated with the innovative behavior of Orphan Drugs companies.But in Chinese, no guiding polices about Rare Disease or Orphan Drugs are issued till now.Under the back ground of national new medical reform and industrial structure adjustment, positively carrying out the innovation incentive mode of Orphan Drugs will efficiently motivate the technology innovation behavior of bolo-medical industry.
The guiding policies of Orphan Drug concerting on new medical reform has no correlation with register and approval system, has weak correlation with industrial guiding policies, which indicate that among all varieties of guiding policy related to innovative motivation of Orphan Drugs ,the synergy is shorted.So driving demand market of Orphan Drugs by taking advantage of healthcare insurance system and establishing motivation mechanism of innovative behavior, are efficient ways about innovation incentive policies of orphans drugs.

Incentive Path of Innovative Behavior for Chinese Orphan Drug
In China, the innovation incentive polices of Orphan Drug firstly is showed on register and approval step, but in hands of investment and assistance to R&D, production and operation, healthcare insurance, no special incentive policies are existed.So the synergy effective among all government policies is essentially to motivate innovative behavior about Orphan Drugs.

Priority Polices in Drugs' Register and Approval Step
Recently, in Chinese, the translation from founded research achievement into clinical use of Orphan Drug has obviously lagged, which may result from disperse of patients, few patients resource, high R&D cost and so on.
So it is very difficult to implement a clinical test and detailed pathological mechanism research.However, Chinese should taking advantage of the relative abundant Rare Disease resource, establish Rare Disease library quickly, build national even globe Rare Disease network to service for Orphan Drugs' research.The global popular method "identify authentication and marketing license" should be Referenced in registering the Orphan Drugs to confirm their identify authentication.
In accordance with "Act of new drugs' special approval", establishing communication system between register and approval section and developer, getting the preferred marketing license authority, properly decreasing the clinical patients and short approval period, supplying aid to the design of clinical program and such methods, setting up administrative protecting time and special individual approval gas for Orphan Drugs, which stipulates approval time limitation of the special gas and reducing standard of relevant expense, will lower the resister and marketing cost of Orphan Drugs epically imported varieties.At the same time, implementing cooperation of "major new drugs discovery initiatives in Chinese ministry of science and technology" and "the committee of Chinese Natural Science Fund" can supply the capital fund in earlier time of Orphan Drugs' R&D project.

Incentive Polices Associated with R&D and Production Step
Because the small target Market and monopoly position of Orphan Drugs, it is necessary to adopt incentive polices related with innovation R&D of Orphan Drugs, the priority strategies of production tax, market guarantee and such administrative method for government to assure the availability of Orphan Drug.By creating and improving intrinsic incentives of the Orphan Drugs companies and also the external environment of market supply, companies' resource can be configured more appropriately and can be made use of more effectively, which guarantee the maximize of social public healthcare welfare in Chinese.
For governments, implementing the fixed-supplier purchasing, capital investment, tax priority and such guiding policies is necessary, which can boost R&D and production enthusiasm of Orphan Drugs companies.Especially, in R&D step, driving the preferred register and approval policies engage with translation mechanism of R&D fruit and system of intelligence poverty protection, and issuing the special facilitated polices for Orphan Drugs' technology and production will get the R&D and production force of Orphan Drugs improved.
As the using time went on and clinical experience was summarized about Orphan Drugs, expanding its arrange of clinical indications, registering and approving new clinical indications will become bombshell in international market in promoting the profitability of companies, such as GLEEVEC developed by NOVARTIS AVASTIN developed by Roche and Genentech.So advocating further research about pharmacy mechanism of Orphan Drugs may become theory foundation of innovative research in bio-medical industry and boost increasing growth of globe medical innovative level.

Guiding Polices Associated with Healthcare System Reform
The Orphan Drug is very expensive, the treatment expense of partial Rare Disease far exceeds than individual affordability.So offering assurance to patients of Rare Disease with healthcare insurance can increase the availability of Orphan Drugs in one hand, stimulate innovative force of their companies on another hand.Always relying on the imported drug is not long tern solution to problems of Chinese Orphan Drugs market.For those Orphan Drugs aimed to high incidence Rare Disease in Chinese, but has been marketed in aboard, the government should establish price negotiation mechanism, or fixed supplier purchasing way, carry out healthcare insurance coverage to enlarge its target markets and stimulate the innovative enthusiasm of companies.Such as organize all departments and consulting expert team to have comprehensive consideration about clinical efficacy, patients' number, foreign guarantee and confirm the price, absorb into national healthcare insurance system.By researching the figures and practical experience in income level, healthcare expenditure, and disposable healthcare resource of all countries, Chinese can maintain the best time to absorb Orphan Drug into planed immunity scope, which reflects the fairness and popularity of Chinese healthcare insurance system.

Synergism Effect of All Incentive Polices from Government
The exploration and innovation about Orphan Drugs' policies, can resolve market demand of Orphan Drugs, but also can strengthen the translation of medical development, and accelerate innovative research and structure adjustment of bio medicine industry.But the result of the empirical analysis reflects that in Chinese there is short of synergy among all incentives polices about Orphan Drugs.Thus, engaging the healthcare insurance policy with register and approve, particular technology innovation and industrial guiding policies so on effectively to construct an integrated policy system related to incentive mechanism of Orphan Drugs' innovative further motivate its innovative behavior and availability, market demand .
Under the background of current new medicine reform policy and developing plan of industrial structure adjustment, all innovation incentive polices should work systematically to resolve motive shortage problem for bio-medical industry in structural adjustment, optimization and upgrade during the 12 th five-years plan.
Referenced regulating experience of Orphan Drug from American FDA, establishing special management section about Orphan Drugs, who harmonize the relationships among all section, play a coordinating roles in register and approve, price regulating, industrial guiding policies, healthcare insurance can effectively motivate the innovative behavior of Orphan Drug companies.

Table 1 .
The public profile about some regions' Orphan Drugs

Table 2 .
The feature of innovative act on Orphan Drug in some countries

Table 3 .
The questionnaires basic information about impact factors on innovation incentive policy of Chinese Orphan Drugs Based on survey figure about impact Factors on innovation incentive Policy of Chinese Orphan Drugs, we make description statistic and verifying factor analysis to get synergistic effect of technical innovation policies of Orphan Drugs for the reference of relevant department about Orphan Drugs

Table 4 .
The questionnaire and description statistics of impact Factors about innovative behavior Policy of

Table 5 .
Confirmatory factor analysis table associated with influencing factor of innovation incentive policies for

Table 6 .
The path coefficients of innovation incentive policies for Orphan Drug