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China aims to decrease the price of drugs

Pacific Prime China takes a look at the recent actions taken by the Chinese government to alleviate the high cost of prescription medication in the country, and what this means for health insurance.

Posted on Mar 10, 2016 by Rob McBroom

 

In the past year various news stories broke which highlighted the incredibly high and rising cost of medication around the world. The most popular is arguably the ongoing story around Turing Pharmaceuticals purchase of the rights to Daraprim, a common antiviral, and subsequent near 5,000% increase in the drug's price. This was just one in a long line of stories that highlight one thing: The cost of prescription medication is expensive, and becoming more so each year.

The rising cost of prescription medication

If you have been to the hospital in China or know someone who has received treatment for an ongoing disease like cancer, you are probably well aware that high-quality prescription medication, usually imported from other countries, can be incredibly high. For example, an article in the China Business Review reported that in 2011, "Nexavar, a liver cancer treatment drug that is commonly prescribed in the United States, is priced at RMB 25,192 for 60 tablets (200 mg each) in China - comparable to its US price." According to Drugs.com, the price in the US has since increased to just over USD 15,000 (Around 97,800 RMB) for 120 pills. While you can expect the price to have increased in China, it is likely not this expensive.

While not every prescription medication will be this expensive in China, costs can still be high, especially if your income is lower than in western countries, or if you live in cities like Shanghai where the cost of living can be quite high.  

The impact this can have on health insurance

Costly pharmaceuticals can have an impact on health insurance, especially if there is an increase in demand for these drugs. In China's case, the population is aging and the prevalence of most major diseases is increasing. Many of these diseases, such as some cancers, diabetes, high blood pressure, etc., require ongoing medication which can be incredibly expensive; especially if the medication needs to be imported into China.

In basic economics, as demand for these medications increases, so to will costs. This means that many people will be increasingly unable to pay for their medication out-of-pocket, instead turning to health insurance to cover the costs. If insurers see an increase in claims for pharmaceutical medication that is also increasing in costs, their usual response will be to increase premiums to cover this. Other insurers will introduce caps and limits that reduce or limit the amount of medication you can claim.

Is anything being done to limit/manage these costs?

The Chinese government is pushing ahead with their goal of being able to offer sound universal medical insurance and health care to the entire population and has noted in the past that the cost of health care and prescription medication is too high. This is a concern that the Chinese government is dealing with, but the solutions being implemented to control the cost of prescription medication are far from simple, and it will take time to achieve a balance where the pharmaceutical market appeals to producers, yet the medicine produced and sold is affordable to the public.

In 2015, the government actually removed state set price caps for most medication. The idea here is that by cutting government interference, the market will play a much bigger role in the determination of demand. According to an article published in the SCMP, "The National Development and Reform Commission (NDRC) said in a statement released yesterday [May 31, 2015] that price caps would disappear on all drugs except anesthetics and some types of psychiatric medications. The commission also pledged to keep a close eye on the market for disruptive practices such as price-fixing to ensure prices remained stable after the new rule took effect." The elimination of the caps went into place June 1, 2015.

Time will tell how effective this is, and whether we will see dramatic price increases in certain medications. If successful, this should help increase the supply of medication available, which means that in the long run prices will remain constant or even decrease for some medicine. Furthermore, in an ideal situation, the Chinese government will be able to exert more pressure on producers, which should result in an increase in quality.

It appears, however, that the government is not going fully hands-off when it comes to the cost of prescription medication. In early March, the Chinese government released an interesting announcement about a new pilot program that falls in line with their current fight to reduce medical costs in the country. According to an article on Yahoo!, "The National Health and Family Planning Commission is negotiating a pilot program with drug firms to lower the price of five drugs."

As of the writing of this article, the names of the medications that will see prices reduced have not been released, what we do know, however, is that they are all high cost, imported cancer drugs.

What this indicates to the experts at Pacific Prime is that, while the government is supporting a more market-oriented pharmaceutical industry, they are still going to implement cost containment measures. This will benefit people taking high-cost medication and ultimately insurers, as the cost of medication will be low, or at the very least managed.

In the meantime, securing a health insurance plan that covers medication would be a good idea for anyone living in China. Contact our experts today to learn more about the plans that we offer and how your medication can be covered.

 

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