The global recession has left medical companies scrambling to find new markets. China’s GDP, adjusted for purchasing power parity, is currently second in the world and has surpassed Japan’s. Medical companies should focus on this growing market. However, before entering the Chinese market it is essential to investigate the market potential and determine reimbursement for your specific medical product. This article will cover the basics of Chinese health care and how to determine medical reimbursement in China for drugs, medical devices, and in-vitro diagnostics.
China faces an enormous challenge in providing healthcare services to its massive population of 1.3 billion. A Chinese person needs public health insurance to be reimbursed for drugs, medical procedures, etc. However, at least 200 million people are uninsured and thus receive no medical reimbursement in China. In 2009, the Chinese government announced a three-year, $124 billion (US) reform plan to provide adequate and affordable healthcare for all its people by 2020. Whether this lofty goal will be reached is unclear.
Basic Medical Insurance
For workers in larger cities, the Chinese government offers basic medical insurance (BMI). This program started in 1999. In 2009, it covered approximately 350 million people. The employer and employee as well as the local government contribute to the program. This system is not intended to be national. BMI is only applicable to employees and retirees in urban areas and civil servants.
The BMI program is regulated both by the central and provincial governments. Therefore, employer and employee contribution amounts can vary greatly from one province to another. BMI can also vary between cities; Shanghai and Beijing have different fee structures, for example. In some cases, wealthier cities can provide supplemental medical insurance as part of this program. Rates of medical reimbursement in China also depend upon hospital type and patient age and employment status.
As part of the China’s 2010 healthcare reform initiative, BMI is being revised and updated to provide more coverage to the Chinese public.
Insurance for Other Groups
In addition to BMI, there are public insurance programs available to specific groups. For example, military medical insurance covers about three million army personnel, spouses without jobs and veterans. Student medical insurance is available for college students, while primary and high school students can obtain only coverage for hospitalizations.
Rural Medical Insurance
In the countryside, access to healthcare is extremely limited. The former medical systems in rural areas withered due to a shift of control from the central to local governments and an overall lack of funding. Since the 1980s, most of the rural population has not had public healthcare access.
In 2003, a rural cooperative medical insurance system was established. This system covers about 750 million rural residents. This system was poorly run and underfunded. Until recently, rural medical insurance and medical reimbursement in China were negligible.
As part of the 2010 healthcare reform program, the government has been building the New Rural Cooperative Medical System.
Private Health Insurance
Private health insurance in China is rare. In the past, there were no domestic private health insurance providers. However, in China today there are more private health insurance carriers and more individuals are considering this option. This is due to the increasing wealth of Chinese people and the increasing number of private insurance companies offering healthcare coverage.
To be successful on the Chinese market, a drug or medical device needs to be included in appropriate reimbursement lists. The application and reimbursement listing procedures can differ greatly depending upon the type of product and the province. Drug and device companies need to decide which provinces to target for listing of medical reimbursement in China.
Those with health insurance usually pay a drug’s full price up front. Afterward, they fill out a form requesting reimbursement and submit it to their province’s Social Insurance Board. Usually, within a month a check is sent to their individual account via their employer. In some Chinese pharmacies, instant reimbursement is available when pharmacists can check a patient’s insurance status electronically and bill them only for the co-pay.
Some urban Chinese are willing and able to pay out-of-pocket for the best drugs, particularly Western branded products. However, most Chinese are highly price conscious, primarily due to low income levels and low insurance coverage. For example, people making the minimum wage of $140 per month in Shanghai may be able to afford some Western drugs, but are more likely to choose domestically made drugs for which they will receive medical reimbursement in China. Therefore, being listed with the government for drug reimbursement allows Western companies to bring their products to a broader consumer population and increase sales.
National Reimbursement Drug List
The central government in Beijing and 31 provincial-level governments decide which drugs the BMI will reimburse. The National Reimbursement Drug List, or NRDL, is supposed to be issued by the central government once every two years. However, the previous revision, completed in 2004 and officially published in 2005, was not updated until 2009 due to government officials’ time being taken up by anti-corruption campaigns and proposals for comprehensive healthcare reform.
The current 2009 NRDL (see Table 1) contains 2,127 drugs, comprising 1,140 Western medicines and 987 traditional Chinese medicines. There are 23 therapeutic classes, from blood system drugs to digestive system drugs to biologics. The majority of drugs fall under the categories of specialist drugs, anti-microbial agents and circulatory system drugs.
Provincial governments also draw up their own Reimbursement Drug Lists (provincial RDLs) used for actual implementation of the system of Chinese medical reimbursement, i.e., to determine reimbursement level. Drugs are divided into two classes: A and B. Class A drugs are reimbursed in full, at a low, fixed price. Basic, widely used drugs are usually put on this list. Class B drugs, on the other hand, are usually higher priced. Class B drugs are reimbursed based upon their active ingredient and on a percentage basis (of the total price). The exact percentage is determined by the provincial government. The non-reimbursed portion is the responsibility of the patient.
It is common to find a drug with more than one reimbursement class, designated by A/B. This designation means that the drug occupies a different class depending upon its formulation. For example, Cefradine is a Class B drug in injection form and a Class A drug in oral form.
In rare cases, the same preparation of the same drug may be in both reimbursement classes based upon its indication or other factors. For example, Lamivudine is a Class A drug when used for AIDS and a Class B drug when used for hepatitis B. This situation is indicated with A/B.
Revisions to the NRDL
Five government bodies are involved in implementation of and revisions to the NRDL. They are listed in Table 2 with their responsibilities and interests.
Similar to drugs, medical devices can be reimbursed on their own. However, more commonly, they receive medical reimbursement in China as part of a procedure. For example, if surgery is covered by insurance, all related devices such as scalpels and sutures are included in the procedure fee for which the hospital is reimbursed. Therefore, hospitals have more incentive to purchase cheap medical devices (to increase their margins). Only certain medical devices (such as stents, bone plates, etc.) are reimbursed separately on their own. In these situations, a hospital may be willing to use more-expensive imported medical devices.
The majority of domestic medical devices are reimbursed via medical procedures. Some examples of products fully reimbursed through medical procedures include locally made Chinese disposables such as syringes, infusion sets and blood bags.
Imported medical devices are generally not reimbursed via medical procedures and almost always require some self-pay. However, imported implant products used in medical procedures receive partial medical reimbursement in China; insurance will pay some of the cost and the patient will pay the rest. Examples include orthopedic surgical products such as plates and screws, cardiac pacemakers, vascular stents and catheters, and artificial organs such as heart valves.
Reimbursable devices are enumerated on a medical device insurance list that is released by the provincial social security bureau.
If a medical device is not on this medical device reimbursement list, the product can still be used in the hospital but the patient must pay for it. Each provincial medical insurance bureau gives an annual budget to every hospital for reimbursement. If the hospital goes over its budget, it will have to pay for the medical devices without government help.
To have its device included on the reimbursement lists, a company needs to develop relationships with key opinion leaders (doctors). In some situations, device companies choose to not be included on the central lists of medical reimbursement in Chinato avoid price reductions. On the other hand, some domestic Chinese device companies prefer to be listed to increase sales.
Reimbursement for in-vitro diagnostics (IVDs)
The Ministry of Human Resource and Social Security (MOHRSS) issues a national guidance listing the range of medical diagnosis and treatment items, including IVDs, that provincial governments can partially reimburse and the treatments and products that cannot be reimbursed.
Each provincial government then determines what the reimbursement rate should be. If the IVD item cannot be fully reimbursed, the patient will have to pay the amount not covered.
Since each provincial government makes these decisions, there are broad variations in rates for medical reimbursement in China for IVDs across the provinces. Hospitals have no say in determining which items can be reimbursed and how much is covered by medical insurance.
Reimbursement pricing is usually based upon a specific drug or medical treatment/diagnosis. A reimbursement code may not directly correlate to a specific IVD product. For example, blood glucose testing overall will have a price code but the device analyzing glucose levels (such as blood glucose strips) will not have a code.
In addition, insurance can only be used in public hospitals. It is generally not allowed in most private hospitals and labs. Also, patients cannot be reimbursed if they buy OTC products such as blood glucose strips from a drugstore.
In short, IVD reimbursement rates are usually determined as part of a medical procedure and are not specific to an IVD product.
Before entering the China medical market, companies must ensure that there is a demand for their medical product and investigate whether there is reimbursement for the product. Without medical reimbursement in China, the potential for sales decreases considerably.
Ames Gross is the president and founder of Pacific Bridge Medical. He is recognized nationally and internationally as a leader in Asian medical markets. To learn more about Pacific Bridge Medical, please see www.pacificbridgemedical.com.
Table 1. 2009 NRDL Sample List
|A||Bismuth Potassium Citrate||Oral|
|B||Boric Acid||Topical liquid
Table 2. Organizations Involved in NRDL Revisions
|Ministry of Human Resources and Social Security (MOHRSS)||Organizer and primary stakeholderManages BMI system and disburses reimbursement funds|
|National Development and Regulatory Commission (NDRC)||Focuses on keeping drug prices down|
|Ministry of Health (MOH)||Implements public hospitals’ use of reimbursement|
|State Food and Drug Administration (SFDA)||Responsible for ensuring the safety and efficacy of drugs|
|Ministry of Finance (MOF)||Accounting|
Compiled by PBM from a variety of sources.