Medicine pric­ing re­forms ready for roll out

China Daily (Canada) - - BUSINESS - ByWANG HONGYI in Shang­hai wanghongyi@chi­nadaily.com.cn

Prices of more than 2,700 drugs will soon be de­ter­mined by the mar­ket, rather than the gov­ern­ment, as China gets ready to roll out its am­bi­tious drug pric­ing re­form plan, in­dus­try sources said on Thurs­day.

TheNa­tion­alDevel­op­men­tandRe­form Com­mis­sion has al­ready sent the draft plan on drug pric­ing re­forms to eight re­lated in­dus­try as­so­ci­a­tions this week to so­licit opin­ion. What this also means is that the cur­rent gov­ern­ment-led pric­ing sys­tem that has been in place for about two decades will end soon.

Cur­rently gov­ern­ment-priced drugs ac­count for around 23 per­cent of the to­tal drug mar­ket in China. The re­forms stip­u­late that the max­i­mum re­tail price, or fac­tory price of drugs, will not be fixed by the gov­ern­ment from Jan­uary 1, 2015. “In­stead, the ac­tual price will be ar­rived at through mar­ket com­pe­ti­tion,” it said.

Ac­cord­ing to the draft plan, drugs in­volved in the re­form will be di­vided into dif­fer­ent types and three of them will see sig­nif­i­cant pric­ing pol­icy changes.

For the drugs that are cov­ered by med­i­cal in­surance, the med­i­cal in­surance de­part­ments will work with other re­lated de­part­ments to work out in­surance pay­ment stan­dards so as to guide the mar­ket price to be formed in a rea­son­able way.

For drugs with lit­tle mar­ket com­pe­ti­tion, such as patent drugs, ex­clu­sively pro­duced tra­di­tional Chi­nese medicines, au­thor­i­ties will ex­plore ways to es­tab­lish a pric­ing ne­go­ti­a­tion mech­a­nism with mul­ti­lat­eral par­tic­i­pa­tion.

Prices of blood prod­ucts, im­mu­nity and preven­tion drugs that are pur­chased by the na­tion and con­tra­cep­tives will be formed through bid­ding pur­chases or ne­go­ti­a­tions, ac­cord­ing to the draft plan. Class I psy­chic drugs, anaes­thetic drugs and low-cost drugs will, how­ever, ad­here to the cur­rent pric­ing pol­icy, the plan said.

Pol­i­cy­mak­ers have also an­a­lyzed the pos­si­ble in­flu­ences of the new pol­icy and be­lieve that drug prices in hos­pi­tals will not rise as they are con­strained by a se­ries of mech­a­nisms and reg­u­la­tions, such as the drugs bid­ding pro­cure­ment mech­a­nism, con­trols on to­tal ex­pen­di­ture for med­i­cal in­surance as well as in­ten­si­fied gov­ern­ment mon­i­tor­ing and su­per­vi­sion of mar­ket trad­ing prices.

But the pos­si­bil­ity that drug prices will rise in some re­tail drug­stores in the ini­tial stages can­not be ruled out, it said.

“Spec­i­fi­ca­tions dif­fer for var­i­ous drugs, and it is dif­fi­cult to de­tect their real cost. The gov­ern­ment pric­ing sys­tem will eas­ily lead to rent-seek­ing,” said LiLei, for­mer head of the price su­per­vi­sion depart­ment at the NDRC, adding that the con­di­tions are ripe for can­celling the gov­ern­ment price ceil­ing.

The drugs pur­chased through the bid­ding pro­cure­ment mech­a­nism have also played a big role in lim­it­ing prices. Con­trols on the to­tal ex­pen­di­ture on med­i­cal in­surance will mo­ti­vate hos­pi­tals to bring down pur­chase prices, Li said.

Chi­nais the world’s sec­ond-largest phar­ma­ceu­ti­cal mar­ket, and its spend­ing on medicines will reach about $155-185 bil­lion in 2018, ac­cord­ing to the lat­est re­port from the In­ter­na­tional mar­ket re­search firm IMSHealth.

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