By Ge Yanfeng, Wang Liejun & Zhang Jiahui

Research Report Vol.18 No.5, 2016

Since the new healthcare reform, China has carried out a series of reforms based on the principle of coordinated reform of medical services, medical insurance and the pharmaceutical industry. It has established national essential drug system, strengthened pharmaceutical evaluation, approval and quality control, and actively studied how to regulate medicine distribution and proper use, all of which have chalked up significant results. Due to many reasons, nonetheless, some problems in China’s medicine-related fields still merit attention. Our project group has done a study in this aspect, and come up with some ideas and conclusions.

I. Some Prominent Problems in Medicine-Related Fields in China

Internationally recognized goals of medicine policies are to make medicine available, affordable, safe, and be used in a proper way. In addition, good medicine policies should promote the healthy development of the pharmaceutical industry. According to the above goals, there are still some problems in medicine-related fields.

1. Medicine availability is mostly guaranteed in China, but some medicines are still in short supply

As many as 168,000 medicine approval documents have been issued by the administration authority. And more than 40,000 medicines in various specifications are produced in China, which can meet the demand of the general public. But recent years saw the want of some medicines. For example, some medicines have such a low profitability that manufacturers are reluctant to produce or deliver. Moreover, some domestic manufacturers are unwilling or unable to develop some medicines for curing rare diseases, and patients have to depend on expensive imported medicines instead. Therefore, for these two cases where some medicines are in short supply, the unavailability of such medicines is actually attributed to unreasonable prices or improper incentives.

2. Medicine affordability varies in different population groups and pharmaceutical categories

National essential drugs and Category A medicines listed in basic medical insurance are generally affordable and most are covered by medical insurance. As a contrast, Category B medicines on the list are expensive, or low-priced but in much use. A big chunk of expenses has to be paid by patients themselves. Hence, it is burdensome for patients, especially for patients included in the New Rural Cooperative Medical Insurance or urban resident basic medical insurance. People with low or middle income cannot afford some self-pay drugs, especially those pricy patented drugs and branded drugs. A typical case is the purchase of Glivec through shopping agents, which has caught much attention recently.

3. Medicine quality is generally improved but problems still remain

The main problem is that there are no unified standards for generic drugs. Therefore, quality varies a lot. In the past two years, authorities have issued policies to strengthen medicine evaluation and approval, and quality consistency assessment of generic drugs. They also carried out self-check and verification of clinical trial data, both of which help improve the quality of generic drugs. But such work has just started, and brought in great impact on related interest groups. So the effects of these polices are yet to be seen. In addition, some medicines without potency or whose potency cannot be proved or even are proved harmful (like some traditional Chinese medicine injections) are still largely used; counterfeit and out-of-date drugs can be seen in the market.

4. With respect to proper use of drugs, prominent problems are still present like drug overdosing and overuse

Though the problem of antibiotics abuse has been alleviated by measures like special-purpose overhaul, administrative supervision, and reimbursing medical expenses based on the classification of diseases determined by hospitals, antibiotics and injections in China are still much more frequently used than the global average. Besides, problems like abuse of traditional Chinese medicine injections and auxiliary medicines become more severe. Medicine abuse not only makes it expensive to seek medical treatment, but also causes serious damage to health.

5. From the perspective of promoting the healthy development of the pharmaceutical industry, China is a large producer of pharmaceuticals, but not a strong or innovative one

At present, China has over 5,000 Chinese-foreign joint or wholly foreign-owned pharmaceutical enterprises. But low industrial concentration and serious competition among low-level production are big problems. Sometimes the same drug is produced by several or even a hundred enterprises. What’s more, domestic drug firms invest little, only 1.5% of sales revenue in research and development (R&D), well below the level of 15% to 20% or even higher of the multinational counterparts. The former also lack innovation, 97% of their products are generic drugs, and their so-called “new drugs” just have different specifications, dosages, or route of administration. Due to poor international competitiveness, only 1% of China’s drug enterprises have been certified by the Quality Management System in Europe and US as of 2014.

II. Main Reasons for the Problems in Medicine-Related Fields

1. The relationship between medical services and the pharmaceutical industry is distorted, as the former is strongly motivated to get benefits from medicines

In the pharmaceutical industry chain, it is the medical services rather than patients that decide what medicine to use in China, and so is true in other parts of the world. But China is more special because of two “engines”, which causes hospitals to over-price and over-prescribe pharmaceuticals.

The first “engine” is at the level of medical institutions. Enterprise-like operation and the policy of increasing drug price to subsidize hospitals make medicine the most important source of profit for medical institutions, which are generally motivated to prescribe more drugs, and their bonus is coupled with drug prescriptions. The second “engine” is at the level of doctors, who have a low nominal salary, and drug companies are highly competitive so that drug commission becomes a key source of income for some medical staff. Due to the two “engines”, both medical services and drug enterprises have strong shared interests and hope to maximize profit out of pricy medicine overuse.

2. Excessive competition among pharmaceutical enterprises leads to many bad behaviors

The underlying cause is the imperfect centralized bidding system for medicine procurement and disorderly distribution of medicines. In many provinces, public bidding only determines who can sell, and several enterprises can win the bid of the same drug. Moreover, as bidding and procurement are separated, there are at least three rounds of competition before the medicine is used in hospitals. The first is competition for winning the bid and being allowed to sell the drug. The second is for procurement contract with medical service institutions. At last, as drugs are used in hospitals, many efforts are needed to encourage doctors to prescribe more medicines and make more sales. ...

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