According to a newly released report by the China Academy of Social Sciences, the average healthcare cost nationwide has been rising 14% per year since 1993 (after removing the inflation factors). “Difficult to see doctors; expensive to see doctors” has become the number one complaint cited by average Chinese citizens. In an effort to control escalating healthcare costs, improve health coverage and better manage medical markets, the Ministry of Health (MOH), State Food and Drug Administration (SFDA) and other Chinese government agencies are initiating new policies that will affect the medical and healthcare market in 2007 and beyond. A few noticeable trends are emerging.

MOH to Control Large Equipment Purchase. The MOH is reinstating a measure, which was in place during the 1980s and 1990s, to require hospitals that plan to purchase high-value medical devices such as computed tomography or magnetic resonance imaging equipment to submit an application to provincial health bureaus. These applications are to be reviewed based on the patient volume, disease prevalence and suitable applications of the equipment. The approving bureau also will look at the installation of currently available equipment in the hospital’s geographic area. This measure is aimed to curb excessive purchases of large equipment and improve utilization rates of installed systems.

MOH to Issue Approved Product List. The MOH also will institute a program to validate medical products that will be sold to hospitals. This goal of the program is to evaluate products based on their features, performance and application to the Chinese market. The data derived from these evaluations will help generate a list of recommended products for hospitals to select from when purchasing their next medical equipment.

Anti-Corruption Movement. With some well-publicized arrests of high-level officials in the healthcare and regulatory agencies, China aims to further curb illegal activities that have been imbedded in medical and pharmaceutical sales, as these crimes are widely believed to have contributed to the high healthcare costs to patients. Law enforcement agencies, along with the MOH, SFDA and others, have launched campaigns to root out under-the-table activities in product sales, public tenders and other commercial transactions. For example, doctors who go on company-sponsored trips must present the academic exchange meeting agendas before being allowed to travel. More measures will be installed to improve the exposure of the governing offices as the year progresses.

Chang-Hong Whitney is president of Whitney Consulting Ltd. in Massachusetts. With an MBA from Babson College (Wellesley, MA) and undergraduate degrees in electronic engineering and international business, she has been consulting for western companies on doing business in China since 1994, focusing on the medical device market. Her services include China regulatory affairs, market research, sourcing and logistics programs and China business strategies. She can be reached at [email protected].