With the approval of NDRC, MOH restated the approval process for large equipment, such as positron emission tomography and expanded into high-end, high-priced medical consumables, such as stents. MOH organized joint purchasing agreements for hospitals in eight provinces for high-end consumables. Beijing City also organized similar programs in 2006 and 2007 for the same categories of products. Each program brought the pricing for these products down by 26.5 percent and 22.1 percent, respectively. Building on this success, MOH organized a national purchasing plan in 2008, affecting high-value disposable products in four categories: cardiac pacemakers, cardiac electrophysiology products, cardiac implants and peripheral cardiovascular implantable products. MOH selected a list of suppliers, their products and invited them to bid on their best prices. Manufacturers who won the bid to provide these products are required to sell under the approved pricing to nonprofit hospitals. According to reports, 78 domestic and international companies with 1,106 products participated in this program. MOH selected 71 companies and approved 948 products. According to MOH, this move reduced average pricing by another 10.08 percent.
Although such government-managed purchasing programs achieved the objective of bringing down healthcare costs to patients, the cost to manufacturers was high. In addition to reduced profit margins, manufacturers needed to pay high fees to participate in the purchasing plan. Companies that make high-quality products were forced to compete with lower-end, “similar” products. Lack of technical knowledge and understanding of product application by the evaluators also played a role in such an inadequate decision-making process. The need to “protect” certain Chinese industries or companies because of their economic contribution to the regional economy also hinders the fair and honest bid process. In addition, the process also squeezes the profit margins that distributors rely on, causing many to either abandon their original business model or move into manufacturing, which can be a risky proposition for both the business as well as consumers.