Along with the 18% price reduction Zadaxin experienced last September, was the inclusion on the Reimbursement Drug List. RDL. China partially reimburses the cost of many drugs, as well as a few medical devices. To be reimbursed, a drug must be put on China's National Reimbursement Drug List (NRDL). NRDL inclusion can greatly expand the potential market of a drug in China by making it more accessible to middle to lower income consumers. Now, signing a deal for distribution with Sinopharm, the largest pharmaceutical distributor in China, will increase Zadaxins' presence in tier 2 and tier 3 hospitals. Sciclones' deal with their existing distributors last year ended up with a net reduction of only 8%. Sciclone must have made the same deal with Sinopharm. So between access to tier 2&3 hospitals, favorable pricing for patients and inclusion on the RDL, Sciclone is ready for new heights.
Even with the price reduction, Zadaxin costs the patient more than 3 times the cost of thymosin from other producers. The little bit of reimbursement doesn't close this gap by much. To broaden coverage of tier 2 and tier 3 hospitals, SciClone has to increase its sales force to make those calls. Unfortunately, such efforts so far haven't produced much results according to the latest 10-Q.
Distribution to these hospitals was never the issue, SciClone's old line-up of distributors covered essentially all hospitals in China. But the direct Zadaxin sales force is needed to make the sale. Sinopharm never provided that in the past even though they typically accounted for 50% or more of SciClone's importation of Zadaxin. That doesn't change as far as we know with the exclusivity agreement.