China Pledges to Implement OTC Drug Price Cuts

The Chinese government has pledged to follow through on substantial drug price cuts announced earlier this year as part of a new OTC pricing reform. On October 10 th, prices of 400 medications (mostly antibiotics) will be cut by an average of 40%, with some to be cut by as much as 63%. The National Development and Reform Commission (NDRC) had proposed a plan to cut the retail prices of 22 drug categories that was to begin August 1, 2005, but since then little had been done to implement the plan. The government estimates that the price cut will generate savings of about CNY4 billion (US$494 million). The 22 drug categories were chosen because they are commonly prescribed to patients.

The Chinese government renewed its commitment to lower drug prices in face of increasing unrest and dissatisfaction amongst Chinese citizens who are unable to afford medication or doctor’s visits. Retail drug prices can be substantially higher than wholesale prices, due in part to hospitals’ pricing practices. A substantial portion of hospital revenues comes from drug sales, which can lead to high mark-ups and the prescription of unnecessary drugs.

This price cut is the latest in a series of drug price cuts implemented by the Chinese government in the past several years.