Chinese healthcare market: Pricing and reimbursement important to control rising healthcare costs and inefficiencies

Press Release   •   Feb 13, 2013 11:48 GMT

The Chinese healthcare market is tempered by the pricing and reimbursement system despite the increasing attractiveness of the large market for drug manufacturers, a growing population and the continued urbanisation of the country. Expenditure on drugs is rapidly increasing and needs strong control measures with regards to pricing and prescriptions. There a number of key challenges which companies are faced with when operating in China's pharmaceutical market including government price controls, extensive retail mark-ups and the wide fluctuations in insurance take-up across the different regions.

The expenditure on healthcare in China is unable to be controlled by regulations on retail pricing alone and it is the efficient pharmaceutical utilization programmes and in particular the implementation of appropriate reimbursement mechanisms and prospective payment systems which will enable China to manage healthcare costs. Reform of the reimbursement mechanism therefore becomes of paramount importance in changing the incentives for providers in the market.

China's healthcare system is faced with difficulties including over-prescription, abuse of quality technology services and cost shifting. The continued expansion of public sector health insurance in China is the main driving force for growth in the pharmaceutical market and this includes a greater reimbursement of drugs.

There are a number of reimbursement organisations operating in China including:

Ministry of Labor and Social Security: The Ministry of Labor and Social Security is in charge of making BHIS formulary.
Provincial Labor and Social Security Authority: Provincial Labor and Social Security Authority can add or remove Tier B drugs on BHIS formulary. The total changes, including adding or removing, should not exceed 15% of Tier B drugs

National Development and Reform Commission: The NDRC is responsible for setting prices for BHIS drugs, new drugs and drug under patents. They are also in charge of approving applications from pharmaceutical companies to set price higher than NDRC prices.

Provincial Pricing Authority: Provincial Pricing Authority is responsible for initial screening of application to set prices higher than NDRC prices. They are also in charge of setting OTC prices, and Tier B formulary drugs adjusted by provincial Labor and Social Security Authority.

Provincial Department of Health: Provincial Department of Health is in charge of maintaining formulary for NCMS. 

For more information on the Pharmaceutical Pricing and Reimbursement in China, see the latest research: China healthcare market

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