From 1996, the Chinese government has adopted more than 30 price control strategies in an attempt to drive down prices. Photo: iStock

A report by a Mainland local newspaper published on Friday described the phenomenon of  rising drug prices in recent years, and the reasons why more than 30 price control strategies by the Chinese government in the last two decades have failed to bring the prices down.

An undercover reporter from the Legal Daily learned from a hospital in Hunan, a mountainous province in southern China, that prices for critical and life-saving drugs including those for resuscitation, blood-clot promoting or boosting white blood cells in patients on chemotherapy, are 10-times higher than last year, the reported.

At the same time, retail prices for over-the-counter (OTC) drugs have also increased sharply, and the market supply has been unstable where out-of-stock has become the norm.

It commonplace across the whole country, the report found.

According to an interview with a pharmaceutical salesman in Beijing, vitamins, supplements and health products are getting more expensive.

For instance, vitamin B complex, which cost 1.5 Chinese yuan per count in 2014, is now offered at 10 yuan per count. Prices for Nitroglycerin (NTG) – the rapidly-acting medication available for preload reduction in patients with a heart condition – has been going up from 4 yuan per 0.5mg sublingual tablet to 55 yuan, while the 10mg intravenous solution per bottle is now 110  yuan from 20 yuan.

From 1996, the Chinese government has adopted more than 30 price control strategies in an attempt to drive down prices. And even mandatory measures are not working.

In the last year alone, a number of policies were introduced. In April, generic drugs that passed evaluation were included in the procurement catalogue, while in August, the central government permitted the increases of fees of doctors’ medical expenses and medical service fees as an effort to lower the price of prescriptions.

By the end of 2018, the implementation of “4+7 with purchasing in bulk” – in simpler words, 4+7 cities including Beijing, Tianjin, Shanghai, Chongqing, Shenyang, Dalian, Xiamen, Guangzhou, Shenzhen, Chengdu and Xi’an were made to follow the centralized drug procurement pilot program organized by the state – allegedly slashed prices of 25 selected medicines by 52% on average, with the highest drop of 96%.

These policies are not working as expected, due to the monopolistic practices of suppliers and pharmaceutical companies.

When the central government presses them on prices, suppliers of pharmaceuticals counteract by cutting the supply of active ingredients, creating shortages of various drugs by lowering production.

Alternatively, some concerned third-parties dominate the market of active ingredients and sell to their pharmaceutical clients only. Other manufacturers would have to pay a higher price to bid for the supplies elsewhere.

Critics say the government should break up the monopolies in the pharmaceutical industry, particularly from the active ingredients suppliers, if the authorities want to effectively curb the price increase of medicines.

Industry insiders interviewed for the report generally believed that a full review and a crackdown on each level of the system, including permitted active ingredients, production of active ingredients, and approval of active ingredients and pharmaceutical excipients, are particularly important.

Li Yong, an associate professor from the China Pharmaceutical University, also urged an increased effort by law enforcement, especially on investigating the monopoly of pharmaceuticals on active ingredients.

In addition, easing the entry barriers for the supply of active pharmaceutical ingredients, introducing market competition mechanisms and shortening the supply chain between pharmaceuticals to actual consumers by breaking intermediate circulation links, should also help bring down drug prices.

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