China’s Pharmaceutical Market Reforms

Chinese Premier Li Keqiang recently announced that China will remove price controls on most pharmaceuticals, letting prices be set by the market — although no specific timeline has been established. China may also impose profit-margin regulations and price caps in order to ensure that drugs remain affordable and accessible. The policy change comes as China works to strengthen regulatory control over the pharmaceutical sector to increase drug quality, transparency and development of the domestic drug industry. Furthermore, the government may soon allow drugs to be sold through online pharmacies. Drugs accounted for approximately 45% of health spending in China in 2014.

The Chinese government is also planning to reform the country’s drug distribution system in an effort to reduce both drug prices and corruption. In the future, many hospitals may only be able to source pharmaceuticals from provincial drug procurement platforms. In addition, the Chinese government is also recommending that many hospitals should buy directly from manufacturers, cutting out most drug distributors.

Western pharmaceutical companies are also reporting delays in regulatory approval for new drug products in China — up to 8 years in some cases. China’s Center for Drug Evaluation reported that the pharmaceutical approval backlog has increased by more than 30% over the past year; there are currently approximately 19,000 drugs waiting to be approved.

The Chinese pharmaceutical market is currently valued at $100 billion, or about 30% of the size of the U.S. pharmaceutical market. The Chinese pharmaceutical market is growing almost 15% annually.