Chang-Hong Whitney01.23.08
Faced with escalating healthcare expenditure, deteriorating foundational healthcare systems and excess purchase of high-end medical products by hospitals, and in response to public resentment of the high costs associated with medical treatments today, the National Development and Reform Commission (NDRC), a top-level macroeconomic management agency under the State Council, has initiated new policies and allocated funding aimed at re-establishing foundational healthcare networks and insurance programs for the general public. Starting with rural and unprivileged areas, several collective healthcare insurance programs have been implemented since 2003 and proved to be successful in managing the basic healthcare needs of the general population. Next on the NDRC’s agenda is establishing other similar programs in various counties. The NDRC said it plans to launch new healthcare reform programs in 2008 that will dramatically restructure the current healthcare systems by providing a safety net through non-profit public hospitals as well as advanced care through private health providers.
At the same time, the Ministry of Health (MOH) reinstated control over purchases of high-end medical equipment (see March 2007 China News) to curb excessive spending by hospital, increase use of technology already installed and demand public bidding for each new purchase.
To reduce public health burdens, the NDRC and MOH jointly issued new restrictions on retail prices for some popular drugs and medical treatments, such as computed tomography scans. Reductions to patient prices for certain treatment (or the price charged to the patient) are between 10% and 25%. Manufacturers, especially those who make consumables, only can sell their products now by participating in public bidding programs jointly organized for eight cities and provinces. Such bidding has dramatically reduced the end-user’s cost by 25% in the first year and 6%-8% per year thereafter. The problem remains, however, that despite government’s good intentions in controlling costs through the bidding system, the program has been riddled with mismanagement due to a lack of expertise about the products and technology as well as bad decisions to purchase inferior products in pursuit of low prices.
Looking ahead, the central government has announced that it will further reform the healthcare system—one measure will be the establishment of four separate systems—public health, health services, health prevention and drug supplies. Along the way, the central government will continue to increase healthcare investments. New rural collective healthcare programs will be implemented around the nation, with higher reimbursements by the government. Pricing controls and large high-end equipment procurement restrictions will remain in effect and even broaden. With more money to be spent in the rural and under-developed provinces, demand will continue to grow in those areas. As a result of all the changes ahead, companies will need to adjust their expectations for the market and design an appropriate marketing and sales strategy for China.