In the past 20 years, drug pricing has escalated along with an influx of new technologies and higher medical costs. Drug prices for consumers could be more than three times the manufacturer’s selling cost. The new healthcare directive is determined to stop price inflation by implementing government-set prices for basic drugs. In August 2009, the State Council—the chief administrative body in the country—announced the first basic drug list, which included 307 categories of Chinese and Western drugs. In October, price details and a list of 2,349 routine drugs used for common medical procedures were announced by the State Council.
Nutritional and other non-essential drugs are not included. Drugs included in this list will enjoy higher government reimbursements than non-essential drugs. The government will designate the manufacturing facilities and manage the distribution of these drugs to the lower-level health centers (such as primary care facilities or clinics), removing middlemen in the drug distribution along with the associated costs and corruption. The government also will set pricing and require sales of these drugs to consumers without any markups. According to the State Council, this basic drug list will be renewed every three years. Compared with drug prices prior to 2009, 45 percent of the drugs will see price reductions, while the rest will remain the same. In general, the total drug price will be reduced by 25 percent. Large cities such as Beijing and Tianjin already have implemented zero market up-sales of drugs in nonprofit hospitals.
The basic drug list also clearly defines the market for non-essential drugs. The pricing of such medicine can be managed locally based on the regional economic conditions and patient affordability.