Chinese Pharmaceutical Policy Studies

Drug procurement through central tender   //  Pharmaceutical commerce  // Drugs used in community   // Drug pricing and prices   //  Hospital regulations  //
Pharmaceutical industry   // New rural cooperative medical services // Prescription  // Urban employees' basic medical insurance   // Sectors combination

Government pricing methods

 

20000720 Suggestions on Reforming Drug Prices Management

 

• Adjusting the management of drug prices: including government pricing and market pricing, and gradually increasing the latter;

• Promote market competition;

• Establish sensitive response system on medicine prices management;

• Improve the scientific and transparency of drug prices management;

• Strengthen the monitor and audit of drug market prices;

 

20001225 Drug Government Pricing Methods

 

Principles for government pricing:

• manufacturers can recoup their reasonable production costs and gain reasonable profits;

• reflect the situation of supply and demand in the market;

• reflect the differences of the quality and therapeutical effects of the drug;

• keep rational drug price ratios;

• encourage the R&D

Government pricing should consider rational production and distribution costs and profits and the prices of drug within the same therapeutical class or substitute drugs; where necessary, international prices for the same drug should be considered;

Methods to set government prices: in principle, social average costs should be followed;

Rational price ratios based on active ingredient per unit should be kept for the same drug produced under the same conditions but with different formulation, packages distinguish GMP and non-GMP drugs, innovators and generics, new drug/premium drugs and general drugs:

• The price of off-patent innovators could be set up to be 35% higher for injections and 30% higher for other formula than generics produced by GMP certified manufacturers;

• Drugs with GMP Certification could be priced up to 40% higher for injections and 30% higher for other dosage forms than non-GMP certified products.

Manufacturers can apply for special pricing permission for higher prices if their drugs have greater efficacy and safety or if the treatment cycle and expenses are much lower than those of other manufacturers producing the same drug

 

Formula to Calculate Drug Retail Price

• The formula to calculate drug retail price of domestic drugs is “retail price=factory price (inc. tax) *(1+distribution price differences)”;

• The formula to calculate drug retail price of imported drugs is “retail price= border price*(1+distribution price differences)”;

• The formula for the factory price of domestic and imported subpackage drug is “factory price = (manufacture costs + period expenses) / (1-sales profit rate) * (1+VAT”;

• The formula for the border price of imported drugs is “border price = C.I.F. * (1+duty rate) * (1+VAT) + border expenses”.

Production costs and period expenses should be audited according to national accounting system;

Differentiation of drug sale expenses rate, maximum sale profit rate and price differentials

 

20001225 Notices on Distributing SPDC Pricing Drug List

 

• Central Government (SPDC/NDRC) sets maximum retail prices for A-list medicines on the national BMI drug lists, and for patented innovator and first-class new drugs (i.e. the active ingredient and its preparation materials extracted from plants, animals or minerals, etc), which have not previously been on sale in China and for second-class new drugs (i.e. newly discovered drugs or preparations).

• Central Government also sets the factory price/landed price of first-class drugs used in mental health, anaesthetics, immunization medicines, and family planning medicines, leaving retail pharmacies and public hospitals to set their own retail price – which cannot be higher than the maximum retail price.

• For patented drugs, manufacturers or distributors can set prices themselves in the year after they received their import registration license, but after one year, SPDC/NDRC makes an official assessment of the price.

• The prices of other drugs excluded in government pricing drug list implement market pricing;

 

20001121 Notices on the Adjustment of Pricing Drugs on B-list

 

• Provincial governments set prices for B-list drugs, and the wholesale prices and retail prices of first-class drugs used in mental health and anaesthetics.

• The total adjustment had to be kept within 5% of Central Government Guided prices.

 

20010201 Issues Related to Drug Separate Pricing

 

Scope: manufacturers can apply for special pricing permission for higher prices if their drugs have greater efficacy and safety or if the treatment cycle and expenses are much lower than those of other manufacturers producing the same drug;

 

Procedure: manufacturers who want to apply for separate pricing must submit their application reports and related materials (requirements refer to Annex) to local provincial price authorities to be first inspection; if successful, the materials and the suggestions in formal styles according to the results of first inspection should be transferred to SPDC;

 

Examining and approval: for most normal medicines, experts’ opinions should be referred to set specific price level;

• experts structure and demonstration conference: experts including experts on medicines, medical services and pricing as well as some managerial personnel from provincial price authorities;

• Annex: requirements for application report and related materials

• medicine name and application indicators;

• major ingredients of the medicine and pharmacology;

• the comparison of production circumstances, procedure and quality standards between medicine applied and controlled medicine;

• the comparison of efficacy and safety or treatment circle and expenses between medicine applied and controlled medicine;

• production and sales volumes, production costs, prices and profits in both this and last year;

• the reasons, basis of separate pricing and preferred prices;

• Controlled medicines should be the medicines in the same category with larger market share.

 

20010717 Notices on Preparation of Drug Separate Pricing Verification Experts Conference for Some Anti-Infection Medicines

20010810 Drug Separate Pricing Verification Conference Proposed Regulation and Index System for Chemical Medicines Applying for Separate Pricing (tryout)

20020530 Supplementary Notices on Declaration Materials of Drug Separate Pricing

 

Methods for drug separate pricing verification conference: qualification and of experts, the procedure of the conference, requirements for the materials handed in by the enterprises, regulations for the experts;

Key points to verify:

• the creativity and sophistication of the drug’s production techniques and procedure;

• verification of production process;

• if the internal quality control standards reach national or international advanced levels and if the examination methods are advanced;

• if the efficacy and safety are obviously higher than other drugs in the same therapeutical class;

• if adverse reaction auditing system is established;

 

Questioning on:

• the reality and credibility of the materials and data on quality differentials;

• if the materials on therapeutical effects and safety differentials due to quality differentials are persuasive  ;

• If the proposed price level is economically reasonable.

 

Auditing indicators system:

• general situation: history and scale of the enterprise; R&D and marketing capacity; production and sales history and market share; production quality (GMP or not);

• production process: pre-production quality assurance action; raw materials procurement; production technique and process; production equipment; auditing system;

• drug quality: internal quality standard; sampling inspection of quality;

• therapeutical effects and safety: comparison; adverse reaction audits;

• expenses: daily dosage and treatment period dosage; daily expenses and treatment period expenses;

• costs and prices: and international prices comparison;

• rationality of price level: cost effectiveness; comparison with pairs;

 

20040401 Notices on Further Improving Drug Separate Pricing Policy

 

• The proposal on separate pricing should be submitted to provincial pricing authority in 20 days after uniform maximum retail price; provincial pricing authority should finish the first trial and transfer to NDRC within 20 days after receiving the proposal by the enterprise; NRDC will establish and publish drug separate pricing scheme;

• NDRC will follow up the sales and investigate for separate pricing drugs. Adjustment can be made according to actual costs or prices, or the changes on efficacy and safety; enterprise should report the changes of costs, prices, safety or efficacy, etc. in the process of production and distribution to provincial pricing authority and NDRC to adjust prices

 

20050107 Notices on Regulations of Drug Price Differences Ratio (Tryout)

• Suitable for government instructive pricing and government pricing drugs;

• Verify drug prices for different dosages, formulation and packaging materials of selected sample drugs with the same INN name;

20050328 Regulations on Implementing Drug Price Differences Ratio (Tryout)

 

• Implementation procedures: selection of samples;

• Application scope: definition of medicine price differential ratios;

• Calculation orders;

• Exceptions: specialty due to medicine itself;

 

20050801 Notices on Distributing NDRC Pricing Drug List

 

• Scope: all POM, including western medicines in IDL, implement government pricing by NDRC;

• Methods and contents:

• Government pricing: manufacturer prices of first-class drugs used in mental health, anaesthetics, contraceptives and drugs for planned immunity;

• Government instructive prices: maximum retail prices of other drugs in government pricing drug list;

• Scope, methods and contents of medicine prices set by provincial governments

20051102 Notices on the Pilots of Pricing Some Drugs from Factory Prices

 

• Piloted scope: vitamins and drugs for mineral deficiency with government instructive pricing, for which NDRC began to set maximum factory prices, deducting discounts but including taxes, and maximum retail prices;

• if manufacturers sell the drugs with prices lower than maximum factory prices, the actual retail prices will be set based on actual factory prices plus respective distribution price differential ratios;

 

20060501 Regulations on Government Pricing

 

20060301 Cost Surveillance and Auditing Methods of Government Pricing Products

20061103 Implementing Cost Surveillance and Auditing Methods of Government Pricing Products

20070801 Technical Specification of Cost Audit When Pricing