Thursday, February 23, 2012

MOH Announces Progress on Public Hospitals Expenditures Control

For healthcare spending, according to TABLE 1, total health expenditure as a proportion of GDP for 2010 from World Health Databook of Euromonitor, China ranks significantly lower than other countries do; the 5.2% of GDP spending is much lower than that of other major pharmaceutical markets such as the US, Japan, Germany and France. It is also lower than other BRIC countries (except for India). The financial funding from Chinese government is insufficient to support the healthcare services that are carried out primarily by public hospitals.

Public hospitals provide over 90% of medical services. Over 40-50% income of hospitals is from drugs. The hospital expenditure control is fundamentally the control of drug consumption, especially the expensive drugs. This is not a new idea; Shanghai Health Bureau had implemented the mandate hospital expenditure control in 1996, a policy penalized hospitals with drug income growth exceeding 15% over the previous year. An obvious effect on control of the soaring growth is observed. The overall hospital income growth of Shanghai in 1994 was over 50% before it decreased to 20% in 1996, while the percentage of drug income in Shanghai hospitals' total income had dropped from over 60% in 1994 to less than 50% in 1996.

It is not surprising a similar result with the Ministry of Health control on hospital expenditure will be expected from the past experience of the Shanghai Health Bureau. What important is the reality that drug income is still critical for hospitals. The government is still struggling with the conflict of controlling the hospital expenditures without financial compensation to hospitals. Chinese hospitals are under government's control but operating based on market, so they have to obtain profit to survive. Controlling their income will have a negative impact on the hospitals' operation. In the long run, the success of these governmental policies will be limited without considering the market driven hospital system.

Another interesting observation is the figures of hospital expenditure growth reported by MOH seem to be very low. Based on the fact that drug income contributes to about 40-50% of hospitals’ income, the 5% growth of the income is contradictory to the drug market growth rate of over 25%. It may be due to the increased drug sales from selfpay market and lower tier health centers. This is in line with some big pharmaceutical players' strategies; a good example is the proactive over 50% price cut of Zocor, a cholesterol lowering drug under EDL from Merck aiming at the penetration to lower tier market.

Source: Pharmaceuticals China Bimonthly Report 1201

Main content of Pharmaceuticals China Bimonthly Report 1201:
-MOH announces progress on public hospitals expenditures control NDRC updates essential drugs tendering system & healthcare reform
-SFDA ensures essential drugs safety and supply
-SFDA strengthens control on internet drug selling
-Major therapeutic classes market review-- Cancer market review
-Antibiotic control impact
-SFDA requested recall of Caelyx and Velcade
-Chinese pharmaceuticals received FDA approval
-HBV therapeutic vaccine Phase III trial continues
… …

Pharmaceuticals China Bimonthly Report, published on 20th bimonthly, can keep you informed of the changes and implications of regulations and policies in China’s pharmaceutical market. By grasping the latest market and product development trends on specific therapeutic classes for decision making, you might understand the potential long-term change of market trend based on potential technologies and drugs under development.

About CCM International
CCM International is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals. CCM International offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis all through its new proprietary product ValoTracer. For more information, please visit

CCM International Ltd.
Guangzhou CCM Information Science & Technology Co., Ltd.
17th Floor, Huihua Commercial & Trade Mansion, No.80 Xianlie Zhong Road, Guangzhou 510070, China
Tel: 86-20-37616606

No comments: