Essential medicines and health reform in China

Ye Lu Ph.DDept. of Health Economics

Fudan University2011-05-30 Geneva

What is the main problem we are trying to resolve?

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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

Rapid increase in health care expenditure （ 1978-2009）

Source: Health Statistic Yearbook

0

1

2

3

4

5

6

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

%

0

200

400

600

800

1000

1200

1400

Yuan

THE per capi ta THE as % of GDP

Decreased share of govt. exp. and increased share of out-of-pocket（ 1990-2009）

0

10

20

30

40

50

60

70

1980 1990 1995 2000 2002 2003 2004 2005 2006 2007 2008 2009

% o

f to

tal h

ealt

h e

xpen

dit

ure Govt. Exp.

Soc. Exp.

Out-of-Pocket

Source: Health Statistic Yearbook, 2010

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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

Pharmaceutical expenditure in China, 1997-2006Year Pharmaceutical expenditure(billion ) % GDP %total health expenditure

1997159.90

2.02 46.88

1998178.34

2.11 46.87

1999198.87

2.22 45.91

2000221.11

2.23 45.40

2001 230.30 2.10 43.83

2002267.67

2.23 46.01

2003290.39

2.14 44.80

2004362.13

2.27 45.55

2005414.21

2.25 45.00

2006448.61

2.13 43.51

2007490.32

1.85 40.74

2008620.24

1.98 41.56

2009745.77

2.19 40.35

Source: China National Health Accounts Report 2010

OECD as well as China TPE as % of GDP

How did we get started?

New Health Care Reform Planned Announced in April 2009

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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

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”

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

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what is the process we are using?

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

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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

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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

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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

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

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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

EM Policy implemented in 2778 counties

June, 2010 Sept. 2010 Dec. 2010

Percentage of EMP with Zero-mark up in Gov. Running Community health centers (%)

38.4 65.7 69.3

Percentage of EMP with Zero-mark up in township hospital (%)

57.2

Percentage of Counties which EM reimbursement by the NCMS (%)

82.9 86.3 94.7

Percentage of Counties which EM reimbursement by the UBEMI and UBRMI (%)

75.8 82.3 94.7

What are the key future policy issues?

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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.

The Variation of Drug Items in Essential Medicine List

Areas No. of EM supplemented by the Province

Total No. in EML

National EML 307

NIngxia 53 360

fujian 148 455

zhejiang 150 457

Anhui 276 583

shandong 216 523

Tianjing 230 537

Beijing 241 548

Guangdong 244 551

Jiangsu 292 599

Shanghai 381 688

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

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