Chang-Hong Whitney11.11.08
Last year, this column reported that the MOH had its authority reinstated to grant (or reject) approvals of expenditures for large medical equipment, such as positive emission tomography systems (see “The Changing China Medical Landscape: High, Medium and Low End Markets” in the May 2007 issue of Medical Product Outsourcing, available at www.mpo-mag.com). With the approval of the NDRC, the MOH has expanded its control over high-end, high-priced medical consumables such as stents and advanced catheter technology.
Since 2004, the MOH has been organizing joint purchasing tenders for eight provincial and city-level hospitals for high-priced consumables. Beijing City also organized two independent tenders in 2006 and 2007. Each tender brought the pricing for these products down by 26.5%, 22.1% and 5.7%, respectively. The 2008 centralized purchasing program is a nationwide tender affecting high-value disposable products in four areas: cardiac pacemaker, cardiac electrophysiology products, cardiac implants and peripheral cardiovascular implantable products.
The MOH is to select a list of suppliers and their products and then set their sales prices. According to reports, 78 domestic and international companies with 1,106 products have participated in this program. The MOH selected 71 companies with 948 products to recommend to non-profit hospitals around the country. All non-profit hospitals are expected to use the same list and prices when purchasing stents or catheters. The MOH organizer believes that this tender is likely to bring the average pricing down by another 10.08%.
Indeed, such a heavily government managed purchasing program has achieved the objective of reducing the healthcare cost to average patients for the time being. But a negative impact is inevitable. The program increases the concentration of technologies and production advantage for a few large suppliers while discouraging new companies and new advanced technology, reducing competition in the industry. There are 17,000 government-owned healthcare institutions around China, and it is questionable if all their needs can be served by the products contained on one list. Centralized purchasing also can be seen as a step back to the old “government controlled” economy, where centralized decision and authorities tend to breed poor judgment and corruption.
It will be interesting to see how the NDRC and MOH manage such a program in the years to come.