| BEIJING/SHANGHAI, April 17
BEIJING/SHANGHAI, April 17 China has backtracked
on its policy of capping retail prices on medicines and will
allow pharmaceutical companies to set prices for some drugs,
after criticism that controls had caused a drug drought that
derailed treatment for millions of patients.
Beijing has been struggling with rising healthcare costs,
violent conflicts between patients and doctors and medicine
safety issues, and President Xi Jinping has said providing
affordable, accessible healthcare is a government priority.
The partial reversal of the price control policy, in an
announcement quietly posted on a government website on Tuesday,
will give drug companies that were reluctant to supply low-cost
medicines greater incentives to do so and likely ease shortages.
But the move is limited to a specific number of drugs and
falls short of tackling the official price controls that have
placed undue price pressures on the pharmaceutical industry.
It follows a series of critical articles in Chinese media
that exposed a shortage of the drug Tapazole faced by millions
of hyperthyroidism patients since last year.
Essential drugs for other conditions have also vanished from
the shelves in the past few years, as domestic manufacturers
have found it not viable to produce them.
China will loosen price controls on a list of "commonly used
low-cost medicines", allowing pharmaceutical companies to set
prices as long as the daily cost of taking the drug "remains in
a certain range", according to a statement on the National
Health and Family Planning Commission's (NHFPC) website.
The statement did not specify what that range was and which
medicines would be included in the list.
"Drug shortages directly impact clinical treatment for
patients, and threaten the health and life of the masses," an
unnamed official said in a Q&A posted on the website. "Securing
the supply of low-cost medicine is an important part of
deepening health and medical system reforms."
Shares in Chinese drugmaker CSPC Pharmaceutical Group Ltd
rose 3.8 percent on Thursday, while Shanghai Fosun
Pharmaceutical (Group) Co. shares rose 1.3 percent.
The new regulations will also allow hospitals to choose
suppliers of these medicines. Under the current drug procurement
system, suppliers are chosen through provincial bidding systems
geared to keeping costs low, driving drug companies to cut or
suspend production of many basic medicines.
"The most important reason (for the drug shortages) is
inappropriate management and control by government bidding
departments in the bidding and procurement process," said Yu
Mingde, president of the Chinese Pharmaceutical Enterprises
Association, an organisation supervised by China's cabinet.
The new policy is expected to improve the supply of
inexpensive basic medicines. A proposal submitted to an
advisory body to China's parliament in March cited a survey that
showed more than 200 kinds of inexpensive medicine were in short
supply, over half of which were priced under 10 yuan ($1.61).
About 300-400 kinds of inexpensive basic medicines, such as
Tapazole, are widely used in China, covering 80 percent of
medicine use of all patients, according to the proposal.
The official price caps and government-run bidding have
forced prices down at the expense of quality, said Yu, with some
companies cutting corners to supply at below-cost prices.
For other essential medicines supplied under public health
programmes, local governments will remain in control of
purchasing and distributing.
Alexander Ng, a Hong Kong-based principal at McKinsey & Co,
a consulting firm, predicted bankruptcies among many small local
pharmaceutical companies, partly due to price pressures.
Such pressures, along with the increased cost of meeting
regulations and probes into corruption in the sector, dragged on
profit growth and squeezed margins last year, according to a
Reuters' analysis of over 50 Chinese healthcare firms.
Combined profit growth in 2013 fell to around 2.6 percent
from 15.2 percent the year before, while profit margins shrank
from close to 17 percent to 10.5 percent.
China has poured more than 3 trillion yuan ($482
billion)into medical reforms over the past five years, focusing
on expanding health insurance coverage and improving access to
medical service and medicines.
The country's healthcare bill is set to hit $1 trillion by
2020, according to a report from McKinsey & Co.
Some pharmaceutical companies had told Reuters they were
unwilling to continue supplying loss-making products.
"We stopped producing in June 2012 because the price was too
low," said a worker surnamed Yang at Beijing Yanjing
Pharmaceutical, one of the major suppliers of Tapazole.
"Our cost is above 2 yuan, but the bid price used to be 1.27
yuan until the first half of last year, we lost millions each
year supplying this medicine."
The shortage of Tapazole, used to treat over-activity of the
thyroid gland that can cause rapid weight gain or palpitations,
last year sent patients scrabbling for an imported alternative,
forcing them to pay a hefty premium.
The existing healthcare system also discourages doctors from
prescribing essential medicines because hospitals make very
little or no money from selling them, making it more difficult
for patients to get treatment with low-cost medicines.
($1 = 6.2214 Chinese Yuan)
(Editing by Sui-Lee Wee and Alex Richardson)