Bloomberg News

China Plans to Add Medicines to Basic Drugs List This Year

March 26, 2012

China will push to reduce the cost of health care this year by adding medicines to its list of drugs subsidized by the government and making it easier for private enterprises including foreign ones to open hospitals.

The government will increase spending on health care with a goal of raising average life expectancy for Chinese citizens to 74.5 years by the end of 2015, according to a plan issued by the State Council and posted to the website of the Ministry of Finance. That’s six months longer than the 74 year average for Chinese men and women that the World Health Organization reported at the end of 2009.

Demand for medicines and doctors has increased as China’s population ages and becomes more urban, with the State Council saying in the plan that there are “worsening contradictions” between the supply and need for health care. The country intends to expand its list of subsidized basic drugs this year to 800 from 307 to counter the cost of treating diseases such as cancer, Health Minister Chen Zhu said last month.

The health-care plan, which covers the five years through 2015, also sets a goal of reducing China’s infant mortality rate to below 12 per 1,000 births and the rate of deaths among pregnant women to less than 22 out of every 100,000. In 2011, China’s infant mortality rate was 12.1 out of 1,000 and its maternal mortality was 26.1 out of 100,000, the official Xinhua News Agency reported, citing the health minister Chen.

Subsidized Drugs

China in 2009 introduced the current roster of 307 basic drugs that are subsidized and purchased in bulk by provincial governments. That essential drugs list may be enlarged this year to include 500 western products and as many as 300 traditional Chinese medicines, Health Minister Chen said last month.

The adjusted list “will increase types of drugs used to treat chronic diseases and children’s illnesses, and cut down on seldom-used drugs,” according to the State Council, adding provinces can add more drugs to their lists “at reasonably controlled” levels.

China will also enhance its system for buying those drugs by “insisting on centralized online procurement at provincial levels”, and focusing on “reducing artificially high drug prices while avoiding cut-throat competition and maintaining quality and supply,” the State Council said.

Foreign and local drugmakers have objected to the expansion of the government’s tendering system for basic drugs that was first tested in Anhui province and which encourages suppliers to compete on price and quality for state contracts.

Price Competition

“Health-care reform is basically about tendering to compete on prices, and I feel this is irresponsible to the drug industry,” Guo Guangchang, chairman and co-founder of Fosun International Ltd. (656), which controls one of China’s biggest drugmakers, Shanghai Fosun Pharmaceutical Co. (600196), told reporters in Beijing on March 9.

To reduce the strain on public hospitals, China will also encourage more investments “by businesses, commercial insurers, charities and foundations” to set up private hospitals and clinics, with a goal of having non-government owned hospitals account for 20 percent of hospital beds and services by 2015.

The government will improve private hospitals’ operating environment, taxation, and medical reimbursement systems, and “offer priority support for social capital to set up non-profit hospitals,” according to the State Council.

To contact the reporter on this story: Daryl Loo in Beijing at dloo7@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net


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