China scraps 15% drug markup at 100 hospitals, to move nationwide by 2017

Print 20 May 2015
EJ Lane / FeircePharmaAsia

China's State Council plans to scrap a 15% markup on drug sales in major hospital nationwide, kicking into gear a pilot that aims to transform pharmaceutical cost and quality problems over a two-year horizon as part of a major health system overhaul.

The council, China's cabinet, issued the directive on May 17, scrapping a profit-driven model for the 100 public hospitals affected in this round and that will expand by 2017 nationwide.

The announcement follows a just-completed comprehensive healthcare reform plan centered on the nation's public hospital system, but with a reach throughout the medical process.

The pharmaceutical industry faces sharp sales and marketing adjustments and the government sees higher subsidies for the urban and rural poor, offering more sales targets, but drug prices are to remain heavily scrutinized along with the entire system of producing and distributing them.

"The situation where most residents flock to a small number of well-equipped major hospitals for treatment needs to be improved," the State Council website said.

The State Council and the National Health and Family Planning Commission established several other targets to gain control of the nation's healthcare system, forecasted by McKinsey to reach $1 trillion by 2020, while expanding coverage for a population of more than 1 billion people.

"Authorities will ensure the optimal distribution of medical resources," the council added. "Medical insurance is encouraged to play a bigger role in effectively reducing public medical costs. The insurance should cover most of the medical expenditure, while the private bills paid by each patient should be lower than 30% by 2017."

It is not the first effort by the government to reform the buying and selling of drugs or the delivery of healthcare. But the changes also reflect facts on the ground with GlaxoSmithKline ($GSK) totally revamping its global sales model in the wake of a bribery charge in China that led to $489 million in fines and local companies ramping up controls needed to obtain mandatory GMP and other certifications and compete on quality and innovation.

Source

Return