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Essential Medicines and Policy Department  (EDM)

International Conferences on Improving Use of Medicines (ICIUM)

Recent progress of China drug policy

Shanlian Hu, MD. Msc. Professor, Shanghai Medical University

China's drug policy was recently formulated at the National Health Conference in December, 1996. The paper is to review the critical issue of the cost escalation of pharmaceutical expenditures. Several policy options have been conducted in China, such as improving the reimbursement drug list, capping hospital revenue, regulating the drug market, etc.

Before the 1980s, the channel of pharmaceutical procurement was unique. Prices were fixed and drug quality was assured. Under the economic transition, the drug market is booming rapidly. The number of pharmaceutical firms has grown from 1,800 in 1989 to more than 4,000 in 1995. The wholesale unit has also increased from 2,500 to some 17,000 over the past ten years. Some fake and substandard medicines have entered the drug market through private wholesalers without licenses. With the price reform outside the health sector, the prices of new drugs, medical supplies and commodities were marketed incrementally. The share of pharmaceutical expenditures in the total medical expenditures is nearly 50-70 percent in different hospital levels. Cost containment of pharmaceutical expenditures and disorder in pharmaceutical procurement and management have become two critical issues in China.


The policies to strengthen drug administration in China include:

blueball.gif (959 bytes)Exploiting a regulated drug administrative system in the process of R &D, production, distribution, pricing, advertising and procurement. The state will improve its essential drugs list and establish classified management with prescribing and OTC drugs.

blueball.gif (959 bytes)Setting up a development plan for medicines which will be in accordance with health care development. Structural adjustment of the pharmaceutical industry and products will increase its economies of scale, quality assurance and market competition.

blueball.gif (959 bytes)Improving drug price setting: the state put forward a drug price policy to limit price ceilings, control margins, and to strengthen the approval and pricing of imported pharmaceuticals.

blueball.gif (959 bytes)Limiting unfair behavior in drug procurement, blocking the flow of false and substandard medicines, and prohibiting illegal profits and commissions given by drug manufactures. The government taxation has been declining 6 billion yuan each year since l990.


The policies of strengthening drug management in China

blueball.gif (959 bytes)Drugs are special commodities

blueball.gif (959 bytes)Exploit a regulated drug administrative system in the process of R&D, production, distribution, pricing, advertising and utilization

blueball.gif (959 bytes)Ensure quality, safety and efficacy of drugs

blueball.gif (959 bytes)Improve the essential drugs system, classified management system between POM and OTC drugs, and drug storage system

blueball.gif (959 bytes)Formulate development plan of pharmaceutical industry

      • Structure adjustment on industry & products
      • Economies of scale
      • Good manufacturing practices & quality assurance

blueball.gif (959 bytes)Encouraging research and development of new drugs

      • Effective drug management
      • Capability of market competition

blueball.gif (959 bytes)Improve drug price management, setting price ceiling and profitability control

blueball.gif (959 bytes)Making an essential drugs list

blueball.gif (959 bytes)Strengthening the approval process and price management for imported drugs

blueball.gif (959 bytes)Limit unfair behavior of competition in drug procurement

blueball.gif (959 bytes)Control unethical marketing of drugs, illegal profit and commission given by drug manufactures

blueball.gif (959 bytes)Block the distribution of false and substandard medicines


Two critical issues of national drug policy in China

blueball.gif (959 bytes)Cost containment of pharmaceutical expenditure

blueball.gif (959 bytes)Disorder in pharmaceutical procurement and management


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