Drug pricing reform in China: analysis of piloted approaches and potential impact of the reform

Abstract

Objectives

In 2009, the Chinese government launched a national healthcare reform programme aiming to control healthcare expenditure and increase the quality of care. As part of this programme, a new drug pricing reform was initiated on 1 June 2015. The objective of this study was to describe the changing landscape of drug pricing policy in China and analyse the potential impact of the reform.

Methods

The authors conducted thorough research on the drug pricing reform using three Chinese databases (CNKI, Wanfang, and Weipu), Chinese health authority websites, relevant press releases, and pharmaceutical blogs and discussion forums. This research was complemented with qualitative research based on targeted interviews with key Chinese opinion leaders representing the authorities’ and prescribers’ perspectives.

Results

With the current reform, the government has attempted to replace its direct control over the prices of reimbursable drugs with indirect, incentive-driven influence. Although the exact implementation of the reform remains unclear at the moment, the changes introduced so far and the pilot project designs indicate that China is considering adaptation of some form of internal and external reference pricing policies, commonly used in the Organisation for Economic Co-operation and Development countries. Several challenges related to the potential new mechanism were identified: 1) the risk of hospital underfunding, if hospital funding reform is not prioritised; 2) the risk of promoting the use of cheap, low-quality drugs, if a reliable quality control system is not in place and discrepancy between the available drugs is present; 3) the risk of increasing disparity in access to care between poor and rich regions, in case of country-wide price convergence; and 4) the risk of industry underinvestment, resulting in reduced competition, issues with quality and sustainability of supply, and potentially negative social impact.

Conclusions

Foreign pricing policies cannot be transferred to China without prioritising historical, cultural, and economic contextualisation. Otherwise, the new policy may be counterproductive and affect the whole healthcare chain, as well as the health outcomes of Chinese patients.

• China
• drug pricing
• healthcare reform
• reference pricing

To access the supplementary material for this article, please see Supplementary files under ‘Article Tools’.

To access the supplementary material for this article, please see Supplementary files under ‘Article Tools’.

Acknowledgements

We thank Dr. Chaohui Dong, deputy director of Medical Insurance Research, Institute for Social Security Research, Ministry of Human Resources and Social Security of People's Republic of China, for his expert advice and support in understanding the Chinese context that was highly valuable for this research. We also thank Emna El Hammi for careful revision of the manuscript.

Notes

To access the supplementary material for this article, please see Supplementary files under ‘Article Tools’.

¹Assumed exchange rate: USD 1 = RMB 6.1

² IRP refers to ‘the practice of using the price(s) of identical medicines (ATC 5 level[) or similar products (ATC 4 level) or even with therapeutic equivalent treatment (not necessarily a medicine) in a country in order to derive a benchmark or reference price for the purposes of setting or negotiating the price or reimbursement of the product in a given country’ (14). IRP aims to limit expenditure on the reimbursement of pharmaceuticals by making use of the existence of equivalent products on the national market and setting a reference price (or reimbursement level) for a group of drugs that are considered to be therapeutically interchangeable. It reinforces price competition and favours generic penetration. Methodologies for assuming therapeutic interchangeability of drugs and reference price calculation vary between countries (Supplementary Table 1) (15–(17)).

³ ERP refers to ‘the practice of using the price(s) of a medicine in one or several countries in order to derive a benchmark or reference price for the purposes of setting or negotiating the price of the product in a given country’ (14). It is widely used by OECD countries as a main or supportive pricing criterion, mainly to control the prices of reimbursable pharmaceuticals that are protected by intellectual property rights and benefit from a legal monopoly. It is considered to be an effective and easy-to-implement cost-containment tool leading to lowered prices of in-patent drugs (Supplementary Table 1) (15, (18, 19)).

⁴The Health Insurance Formulary includes the National Reimbursement Drug List and Provincial Reimbursement Drug List.

⁵Exact dose and pack size not reported.