China Reform Monitor: No. 768

[Editor’s Introduction: In January China's State Council passed a medical reform plan that promised to spend 850 billion Renminbi ($123 billion) by 2011 to provide universal medical service to the country's 1.3 billion people. On April 6, after several months of internal debate, the Central Committee of the Communist Party of China (CPC) and China's State Council jointly issued a final guideline on fixing the ailing health care system. The plan, now being implemented, includes the expansion of medical insurance coverage, the building of a catalogue of drugs mostly needed by the public and the establishment of thousands of community medical clinics. According to China’s Ministry of Health (MoH) the scale of the problem is staggering: at the end of 2008 there were 260 million Chinese with chronic diseases and 10 million new cases each year. In 2008, the number of Chinese with hypertension increased from 14 million in 1993 to 73 million, the number of cerebrovascular disease patients increased from 5 million to 13 million, and diabetes cases increased from 5 million to 14 million. Over the last week Russia’s Interfax News Agency has published a series of reports detailing China’s healthcare reforms. This special issue CRM highlights Interfax’s reporting.]

June 8:

To reduce the burden on its overcrowded hospitals China boost the role of community health clinics in chronic disease treatment and prevention. Despite overcrowding many Chinese still prefer to go to large hospitals while community health clinics remain under utilized. Beijing has established 24,260 community health clinics – smaller-scale local level health centers offering outpatient medical treatment – across the country and in the next three years will build 11,000 more in 3,700 cities, according to MoH. Community health clinics will collect residents' health data and will administer regular long-term care for chronic conditions. Large hospitals will focus on the diagnosis and immediate or specialized treatments. Interfax report.

June 12:

China’s Insurance Regulatory Commission (CIRC) will promote the role of private insurance companies in the new health care reform program. New policies will focus on developing a viable commercial insurance market, implementing the government’s basic medical insurance program, and supervising the medical insurance sector. China’s health insurance companies will offer a range of products including long-term care and medical liability insurance. Since 2002 China’s commercial health insurance market has been growing at an average annual rate of nearly 30 percent and has added about 100 insurance companies. CIRC said close cooperation between insurance companies and the government “will help the government reduce administrative costs and limit unreasonable medical expenses.” Other possible experiments may include letting insurance companies purchase stakes in hospitals and the provision of residents’ medical records to private insurers “to allow them to better develop health insurance products.” Interfax report.

June 15:

MoH’s much-anticipated essential drug list will not, in the short term, impact multinational pharmaceutical companies’ operations in China. The essential drug list comprises commonly purchased generic drugs for which patients can receive reimbursements under Beijing’s new health care scheme. It is unlikely drugs produced by large multinational pharmaceutical companies will be included in the first version. In order to gain market share in lower tier hospitals multinational drug manufacturers have begun looking into merger and acquisition opportunities with local companies that produce low-cost drugs. Traditionally, multinational drug manufacturers such as Roche, AstraZeneca and Merck have focused primarily selling more lucrative high-end drugs to China’s top tier hospitals. Interfax report.

June 17:

China’s new healthcare reform will seek to attract foreign expertise by loosening regulations and adding incentives to encourage mergers and acquisitions between foreign and Chinese drug makers. Purchasing Chinese firms to exploit their proprietary acquisition and distribution channels remains one of the quickest ways for foreign investors to access various Chinese markets. In China’s pharmaceutical industry lowered land and construction costs give foreign companies the opportunity to make higher value acquisitions and local authorities have been encouraged to loosen regulatory barriers. Interfax report.