The real cost of healthcare(2)

Further reform

The nation is undergoing a huge medical reform to provide universal care for its 1.3 billion population. Both President Xi Jinping and Premier Li Keqiang reiterated during government conferences and meetings that affordable healthcare is a key part of the Party's and the government's agenda. To achieve overall medical care coverage, cutting medicine prices to reduce medical costs is a core issue.

China's graft-to-collusion crackdown and pricing investigation in the medical sector cover not only foreign companies but also Chinese businesses, Guo said.

In early July, the National Development and Reform Commission asked 60 drugmakers, including 27 foreign multinationals - among them Boehringer-Ingelheim Pharmaceuticals Inc, GSK, Baxter Inc and MSD - as well as domestic companies, including more than 10 listed drugmakers, to submit their cost and pricing files for review.

The commission said it was a routine cost and price data collection task and has been practiced on a random basis for many years.

"But this year it's different. The commission is taking real action," said the vice-president of a Shanghai-listed Chinese biopharmaceutical company, speaking anonymously. He is responsible for the daily operations of a Jiangsu-based drugmaker.

The commission, China's economic planner and price supervisor, has urged and forced drugmakers to cut prices of prescribed medicines several times, without noticeable results.

"The government is putting pressure on drugmakers to lower prices. Foreign companies should be the first to bear the brunt because many of their medicines are self-developed and have higher prices compared with Chinese companies," said Li.

Many multinational drugmakers claim research and development costs - usually taking 10 years and costing $1 billion for the development of a new medicine - should be taken into account when setting prices. Appropriate returns enable them to continue investing in their current portfolio of medicines and the next generation of breakthrough innovations, they said.

"However, many medicines have or are about to lose their patents, so the excuse is not strong enough to support higher prices," said the vice-president of the Shanghai-listed Chinese company.

Anti-corruption efforts and pressure to cut prices cannot solve fundamental problems unless China deepens its medical reforms and changes the way its medical industry operates, said Guo.

The sales manager at Roche said bribing people who are responsible for bidding for products on China's essential drug list and national reimbursement drug list, drug pricing and hospital purchasing and offering kickbacks to doctors to prescribe a particular drug have increased medical costs.

It is a widely known secret in China's medical sector. Both multinational and domestic companies indulge in the practice.

"We are not the fundamental cause (of the high prices). Is it fair to label these people as immoral and punish them?" he asked.

The National Health and Family Planning Commission and the National Development and Reform Commission pledged to set up a new medical care system to replace the current one in which hospitals mainly depend on medicine sales to pay for operational costs and development.

Separating medical care services and drug sales is essential. It will result in the separation of service providers, and medicine purchasers and drugmakers, thereby avoiding any risk of collusion and disconnecting interests between parties.

Liu from Renmin University of China said the reform commission has the last say on pricing, but being the price supervisor has its own problems.

"Anti-corruption efforts should be strengthened at the government level. Administration and executive responsibilities should be clearly identified among various government bodies," he added.

The Chinese government reiterated its determination to fight graft and severely punished some guilty officials this year.

"The market is turning more and more transparent and becoming standardized. I believe it's a good thing for multinational companies in China," said Liu.