Essential medicines and health reform in China

1. Essential medicines and health reform in China Ye Lu Ph.D Dept. of Health Economics Fudan University 2011-05-30 Geneva

2. What is the main problem we are trying to resolve?

3. Problems in China’s Health System • China’s health system is “sick” and the diagnosis is clear: • “Kan Bing Nan, Kan Bing Gui” • Healthcare is available but not affordable and not accessible • The problems have been detected: • Insufficient Government funding for public health/essential care; • Distorted provider payment system relying on fee-for-service; • Wide-spread exposure to health-related financial risk; • Weak quality/safety management and cost control systems; • Unclear and insufficient role of government

4. Rapid increase in health care expenditure （1978-2009） Source: Health Statistic Yearbook

5. Decreased share of govt. exp. and increased share of out-of-pocket（1990-2009） Source: Health Statistic Yearbook, 2010

6. The Issue of Pharmaceutical Expenditure in China • Drug revenue is the main source of reimbursement for hospitals • High proportion of pharmaceutical expenditure in total health expenditure • High economic burden for the patient is caused by drugs • Irrational price setting on drugs

7. Pharmaceutical expenditure in China, 1997-2006 Source: China National Health Accounts Report 2010

8. OECD as well as China TPE as % of GDP

9. How did we get started? New Health Care Reform Planned Announced in April 2009

10. Five Core Tasks(2009-2011) • The Healthcare Financing -Universal Basic medical insurance system -Equal public Health system • Health care Delivery -Sound public community facilities -Essential medicine policy system -Public hospital reform

11. National Essential Medicine System • Improve drug supply • Central Government sets "guiding retail prices "of essential medicines • “Based on the result of tender, provincial governments set the unified purchasing prices within the range of the government purchasing price” • “government run health care institutions at grass-roots levels shall sell drugs with zero mark up” • Essential medicines will be insured, “with the reimbursing rate much higher than that of non-essential medicines”

12. The timeline of promoting National essential medicines • 2009, each province (autonomous regions and municipalities) in 30% of the government-run urban community health center and county implementation of the system • 2010, 60% • 2011 initial establishment of a national essential medicines system • Full implementation the national essential medicines system

13. what is the process we are using?

14. National essential medicines list • 2009 version of EML for Community based health center (Aug, 2009) • 205 kinds chemical drugs and biological products • 102 varieties Chinese medicines • coupled with policy of “0 mark-up” for sales and public subsidy for losses, aiming to control overprescribing in community and rural public facilities

15. Pricing • National Development and Reform Commission(NDRC) Set the retail price for the national essential medicines 296, 2349 formulation • Involving more than 3,000 pharmaceutical enterprises • 49% of drug prices are not adjusted, 45% of drug price cuts, the average decline of 12%, 6% of drugs to raise prices

16. Bidding and purchasing of essential drugs • the government-led centralized drug purchasing • Online procurement, price transparency • direct delivery • Drug prices are not higher than 15% of ex-factory price

17. Medicine Supply and Procurement • Single tender, volume-price negotiation and unified distribution is to be used for procurement, with an emphasis on reducing intermediaries in the distribution chain

18. Rational use of medicine • The government's primary health care and health institutions all the equipment and the use of national essential medicines • Other types of medical institutions have to choice to use a certain percentage of essential medicines • Establish an effective management system of essential medicines

19. Current situation • Implemented in 60% of community health center in the provinces. • The price of medicines are reduced 20-30% • Patients would like to visit secondary hospitals for available medicines • Cost of Community health centers cannot be fully reimbursement by the government after implementing the zero mark-up policy • Pharmaceutical manufactories would not like to produce the EM due to the low price

20. EM Policy implemented in 2778 counties

21. What are the key future policy issues?

22. Key issues • 307 medicines in EML cannot meet the needs of urban residents. (children, chronic disease, antibiotics) • Main challenges in financing schemes (Compensation mechanism needs to be further improved) • Mechanism to incentive doctor rational prescribe of medicines • Price regulation for EM need to be improved. • How to balance the quality and price of the EM (The lower price is the better?) • How to implement the EMP in non- government running health facilities and village clinics.

23. The Variation of Drug Items in Essential Medicine List

24. Prioritize the national essential drug system 2011 • consolidate and expand the scope of the essential medicine system and implement the system in county and regional medical institutions • consider adjusting the national essential drug list; • improve essential drug procurement, distribution, management, and use; • improve drug payment policies; • encourage high-level hospitals to guide grassroots medical institutions on the use of medicines

25. Welcome to Shanghai