China’s health reforms set to cut hospital drug dependecy

Friday, May 22, 2015

A key objective is to separate hospital and doctor incomes from pharmaceutical sales

A planned reform of China’s health sector is aimed at rooting out corruption and reducing the reliance by hospitals on drug prescriptions for income, Chinese officials said on Friday.

National Health and Family Planning Commission officials said the reforms will create new hospital revenue streams and improve hospital profits by offering patients varied service levels with matching tiered pricing.

Reforms, which aim to tackle some of the biggest problems in China’s fast-growing but deeply underfunded medical system, will boost hospital profits by building out the medical insurance system to expand coverage of care, they said.

A key objective is to separate hospital and doctor incomes from pharmaceutical sales, which have been too closely linked, Sun Zhigang, vice minister of the commission, told a news briefing.

“We must eradicate the reliance on drug sales,” said Mr. Sun, adding that the government will offer hospitals more assistance to separate doctor incomes from pharmaceutical sales. New payment systems for doctors will base salaries on performance and skill rather than on the number of prescriptions sold, Mr. Sun said.

The officials gave few details on the timeline for their reform goals, but they said they would require all county level hospitals to separate their revenue from drug sales this year.

Hospitals in China, unlike in many other markets, rely on drug sales to provide nearly 80% of their revenue, according to consultancy Bain & Co. That has led to overprescribing and widespread mistrust of the medical system. Doctors are also widely seen as underpaid, making them prime targets for drug company payments and favors.

Competition to get drugs into hospitals has also led to kickbacks and other forms of corruption, industry experts say.

Mr. Sun also said reforms aim to bring down the cost of drugs for patients, adding this will be achieved through changes in drug procurement and sales to increase efficiency.

New procedures will be more in line with those practiced overseas, pushing drug prices lower through competitive bidding and volume discounts. For specialized patented drugs, health officials are considering a multiparty negotiating process, Mr. Sun said, though he didn’t specify which parties would be included.

Mr. Sun said the government will treat foreign and domestic drug makers equally as they compete under the same drug procurement procedures.

Separately, Mr. Sun said that health officials support sales of pharmaceuticals online in the effort to restructure the health care system though he didn't say when rules might be rolled out.

“We need to do more research,” said Mr. Sun.

 

wsj.com

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