China Issues Guidelines to Improve Drug Price Formation Mechanism
Recently, the General Office of the State Council has issued the “Several Opinions on Improving the Drug Price Formation Mechanism”, serving as a “compass” for regulating drug prices and promoting the healthy development of the pharmaceutical industry, according to Xinhua News Agency. On April 15, the State Council Information Office held a regular policy briefing to elaborate on the full-cycle, full-channel and all-field drug price formation mechanism.
Shi Zihai, Deputy Director of the National Healthcare Security Administration, introduced at the briefing that since June 2015, except for narcotic drugs and Class I psychotropic drugs, the government pricing for all other drugs has been abolished and market-adjusted prices have been implemented. Enterprises independently set prices based on factors such as clinical value, market supply and demand, and social affordability, with actual transaction prices mainly formed through market competition.
As a special people’s livelihood necessity, drugs involve a complex interest pattern. On the one hand, it is necessary to optimize resource allocation and balance the interests of all parties through the market to prevent market failure; on the other hand, due to the high professional and technical threshold of drugs and information asymmetry, the government must take the initiative to fill the gap and not be absent to protect the people’s health and well-being, Shi Zihai added.
He emphasized that it is necessary to scientifically grasp the relationship between the market and the government, vitality and order, efficiency and fairness in the pharmaceutical field from the perspective of people’s interests, industrial development and government governance. While adhering to the market-oriented drug price formation mechanism, the government will play a role in building platforms, promoting development, formulating rules and curbing excessive prices, so as to achieve “effective deregulation and good supervision”.
The Opinions put forward a package of reform measures to guide the rational formation of drug prices, standardize price order and promote coordinated governance. For example, it proposes to “promote a reasonable price gradient between reference listed drugs and generic drugs”, according to China Pharmaceutical News. Reference listed drugs, mostly well-known original research drugs officially recognized as the control for generic drug consistency evaluation, and generic drugs are the commonly understood generic drugs. Promoting a certain price gradient difference between the two is an international common practice, aiming to support innovative R&D and promote the relative balance of prices of the same type of drugs produced by different enterprises.
In addition, the Opinions advocate “implementing intelligent drug price monitoring” and “implementing drug price risk early warning”, according to the National Healthcare Security Administration. Relying on the national online drug price list, drugs with significantly high prices on provincial medical procurement platforms will be marked with “red and yellow labels”. This is not to force medical institutions not to purchase these high-priced drugs, but to break information asymmetry, prompt medical institutions of price risks, guide them to purchase high-quality and reasonably priced drugs, and further guide enterprises to set prices rationally.
Industry insiders pointed out that the introduction of the Opinions will help optimize the drug price formation mechanism, balance the interests of enterprises, medical institutions and the public, promote the high-quality development of the pharmaceutical industry, and better protect the people’s right to health.
