China’s Dream of Universal Healthcare by 2020 Conflicts with Pharma Industry Growth Plan

Tuesday 3 July 2012, Amsterdam

China’s expectations of growth in the national pharmaceutical industry could prove a major hurdle in the country’s race for universal healthcare by 2020, according to the new Pharmaceutical Pricing and Reimbursement in China - Series of Mandated Price Cuts Not Effective in Stemming Healthcare Expenditures report.

The report states that the key factor in cultivating these two potentially conflicting projects may rest on the careful balancing of drug prices.

China’s Essential Drug System (EDS), which includes the National Essential Drug List (NEDL), forms the spine of the country’s healthcare system and is responsible for providing drugs at affordable prices in government hospitals.

Mandated price cuts over the last few years have had the combined effect of stemming healthcare expenditure while improving access to medications for the poor and uninsured. The National Development and Reform Commission (NDRC) introduced a 17% price cut to 174 drugs in December 2010, and a 21% cut to 162 drugs in March 2011, with the NDRC stating the latter series of reductions will bring about an annual saving of RMB 10 bn ($1.5 bn).

However, drug sales are used to subsidise public hospitals and funding is required to spur on China’s pharmaceutical industry, so finding the right balance may prove to be biggest challenge in the creation of a universal healthcare system.

The NDRC also plans to cut the prices of other medicines, the initial prices of which are determined by the government. These prices are based on production cost and the condition of market supply and demand. It is expected that the Chinese government will gradually narrow the price premium of the same drugs, between multinational and domestic manufacturers.

Comparatively, healthcare expenditure is low in China. At just 5.1% of GDP in 2010, the country’s spending is modest in comparison with emerging economies like Brazil, who spent 9.0% of GDP in the same year. Healthcare has been on the rise in China though, and this research expects this trend to continue until at least 2016.

This report provides a comprehensive overview of the healthcare system, and the pricing and reimbursement process in China with key data, information and analysis of pricing and reimbursement steps.

The report closely scrutinizes major changes in the pharmaceuticals-related pricing and reimbursement scene in China, due to the implementation of the 2009 Healthcare Reform.