China healthcare reform to relax curbs on foreign investment in hospitals

BEIJING Wed May 28, 2014 3:34am EDT

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BEIJING May 28 (Reuters) - China will ease curbs on foreign investment in joint-venture hospitals, the government said on Wednesday, as it deepens a sweeping overhaul of its healthcare system aimed at cutting costs and sprucing up overloaded public services.

China is an appealing market for pharmaceutical firms and medical-equipment makers, with spending in the industry expected to nearly triple to $1 trillion by 2020 from $357 billion in 2011, according to consulting firm McKinsey.

In a healthcare reform plan for 2014 published on its website, China's cabinet, the State Council, said it aimed to relax limits on foreign investment in hospitals on the mainland.

The plan involves overhauling the management of medical joint-ventures that involve overseas partners, including "reducing restrictions on the percentage of foreign ownership in medical JVs and collaborations," it said in the statement.

The move would increase the number of cities where investors from Hong Kong, Macau and Taiwan could set up wholly-owned medical institutions, and allow overseas investors to set up wholly-owned hospitals in designated areas, such as the Shanghai free trade zone.

The statement gave no details of the timeframe of the easing or the changes in holdings.

The ambitious overhaul also aims to bolster insurance coverage and crack down on graft, key areas for President Xi Jingping, who is looking to improve access and cut healthcare costs for the country's population of nearly 1.4 billion.

Since 2009, China has spent 3 trillion yuan ($480 billion) on healthcare reform, but the system still struggles with a scarcity of doctors, attacks by patients on medical staff and a fragmented drug distribution and retail market.

China will tighten up on drug distribution by clamping down on fake drugs, kickbacks to doctors and illegal sales tactics, the government said in the statement.

Chinese authorities charged executives at British drugmaker GlaxoSmithKline Plc earlier this month with corruption, in an intensifying crackdown on graft and high prices in the country's healthcare sector.

AFFORDABLE

Authorities will also look to bolster drug price monitoring and transparency, as well as toughening price supervision of imported drugs and medical equipment, the State Council said.

The government said new policies would increase prices for medical services, such as surgery and diagnosis, while lowering drug prices by reducing mark-ups and through a government-run medicine procurement scheme focused on lowering costs.

China's underfunded network of 13,500 public hospitals relies heavily on drug sales, contributing to inflated prices, kickbacks and tension between patients and doctors.

About 40 percent of public hospital revenue in 2011 came from prescribing drugs, Health Ministry data show, while medical services accounted for just over half, with government subsidies and other income making up the rest.

Health authorities will also extend to the entire country a special insurance system to help battle major illnesses.

Many people complain that serious illnesses, such as cancer and diabetes, can bankrupt households under the current system, where patients often have to pay much of the cost out-of-pocket.

China will also boost subsidies for basic medical coverage for rural and urban residents by 14 percent to 320 yuan per person annually, the Ministry of Finance said on Tuesday.

More assistance will go to China's poorer western and central areas, as the government looks to close the healthcare quality gap with the east coast and inland regions. ($1=6.2486 Chinese yuan) (Reporting by Li Hui and Adam Jourdan; Editing by Clarence Fernandez)

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