Cheaper drug prices the destination in China healthcare reform map

China's Premier Li Keqiang said the State Council has mapped out medical system reforms for this year with plans to buy drugs for public hospitals via a central system and then compare prices to pharmacies and other outlets for transparency. 

Chinese Premier Li Keqiang

To be able to get a better handle on the way drugs are bought and sold, China will track and trace the source of purchases to the final sale points and measure other areas such as quality, Li said in a statement posted on the State Council's website.

"One of the key goals in 2016's medical system reform is to enhance centralized procurement of drugs in public hospitals, establish a mechanism to track drugs' factory price, and record any price markups in the process of circulation," Li said in the statement.

The tracking system details are of interest after Hangzhou-based Alibaba Group ($BABA) said earlier this month it would drop plans for now to integrate efforts to sell drugs online via its Hong Kong-listed Alibaba Health Information Technology (Ali Health), citing a complex regulatory environment.

The move came weeks after China FDA put a moratorium on Ali Health's electronic drug tracking system after a lawsuit was filed by domestic pharmacy chains alleging it was gaining an unfair trade advantage over other drug sellers.

Li however in the statement suggested sales channels would be widened along with subsidized or free access for more expensive medicines.

"In addition, patients can choose to buy medicines in hospitals or at the pharmacies. A reserve system for high-demand and low-supply drugs should also be set up and more special drugs, such as those for HIV/AIDS, should be provided for free."

In March, Li Bin, director of the National Health and Family Planning Commission (NHFPC), said that China is in talks to cut prices on 5 imported drugs, three in oncology, as part of a volume for savings push.

China's massive public hospitals have long been ground zero for drug sales for multinational and domestic firms, but that focus is changing, albeit slowly for now.

Earlier this month, the State Council said it wants to expand a program now in pilot at 100 urban public hospitals and smaller centers to 200 locations to fully abolishing any markups on drugs sold at the centers.

The pilot program however has drawn some criticism because the hospitals relied on markups on drugs to keep other fee costs in check. Li had an answer to this issue.

"Apart from (a) reduction in drug prices, the merit pay system in medical institutions should be improved by taking steps such as increasing the medical service fee," Li said. "An incentive mechanism linking medical staff's responsibilities and work performance needs to be set up to highlight their technical and labor value."

China's efforts to overhaul the way drugs are made, bought and consumed are also part of vast changes planned in insurance access, how patients first enter the system, which is often at hospitals instead of clinics, and plans afoot to spur biotech-style innovation domestically.

Along those lines, Li suggested a more old-school approach that would require doctors to take a trip out of the big institutions to smaller centers and be "encouraged to work at medical institutions at the grassroots level or open their own pilot health clinics."

Source