China: New Prices Caps on Over 400 Pharmaceuticals

Beginning June 7, 2004, the China National Development and Reform Commission (NDRC) implemented new price caps on over 400 domestic and foreign made pharmaceuticals, reducing drug prices by as much as 50%. This is the government’s latest effort to reduce irregularities in the prices of pharmaceuticals and make them more affordable for the Chinese public. Since 1997, China has introduced a number of measures to establish fixed prices for certain pharmaceuticals, and in doing so, has saved patients several billion dollars ( US) during this time.

This latest price cap will focus on monitoring hospitals and pharmacies, as they often sell drugs at higher prices in order for the hospital or pharmacy to receive more money and therefore increased benefits. Some of these facilities even intentionally avoid selling drugs that have price caps so they could bring in higher profits. Other facilities prescribe drugs that are unnecessary and not needed to treat the patient’s illness. To date, about 80,000 medical institutions were inspected; investigators found 85,000 violations in pricing.

The NDRC established the new price caps by consulting with pharmaceutical manufacturers, sellers, hospitals and consumer representatives and based the prices on average production costs and market prices of new drugs. These new prices cuts are expected to decrease profits at hospitals and pharmacies. In addition, any medical facility found in violation of the new price caps will be punished accordingly by being given a warning, forced to turn over their excessive profits, fined or even revoked of their license for that particular drug.