Price Caps for Low-Cost Drugs Eased in China

On May 8, 2014, China’s National Development and Reform Commission (NDRC) announced that retail price caps for a list of cheap, basic drugs would be relaxed, effective immediately. Instead, pharmaceutical companies will be able to set retail prices based on their costs of production. The medicines affected by this move include painkillers and antibiotics, such as amoxicillin. The Chinese government hopes that this change will result in better quality drug products and increased medicine supplies.

This relaxation of price caps will affect 283 Western medicines with a daily cost to the patient of up to 3 yuan ($0.50) and 250 traditional Chinese medicines with a daily patient cost of not more than 5 yuan ($0.85). Any drugs on the list of low-cost medicines that have daily prices over these limits will still have price caps. Local governments will enhance scrutiny of price increases.

China has recently struggled to provide low-cost basic medicines, resulting in a lack of medical treatment for millions of patients for the past several years. Official price caps and a bidding process that is run by provincial governments have together forced down the price of medicines. Local drug companies producing these basic drugs are no longer financially viable. The local drug manufacturers that are supplying drugs are often able to do so only by cutting costs — resulting in poor quality medicines. The Chinese government has announced that the provision of accessible, affordable healthcare is an important priority.