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China cuts maximum retail price of drugs

Source:   Time:

China slashed the maximum retail price for more than 1,200 types of antibiotics and circulatory system drugs on Monday.

The National Development and Reform Commission (NDRC), the country's state planning agency, announced rules earlier this month requiring hospitals and clinics nationwide to cap the price of certain drugs. The rules take effect on Monday.

The price caps, which are aimed at combating inflation and warding off disgruntlement over high healthcare costs, will cut the prices of 1,265 types of drugs by an average of 21 percent, according to Pharma China, a publication that specialises in China's pharmaceutical sector.

The NDRC estimated that the rules will save patients 10 billion yuan ($1.53 billion) annually.

The NDRC also pledged to step up inspection with violators facing fines of up to five times the value of "unlawful" profits or closure.

The country's inflation topped expectations at 4.9 percent in the year to February, near its fastest level in more than two years, and looks set to climb in coming months.

MORE PRICE CONTROLS EXPECTED

Analysts predict further price cuts.

"What becomes worrying is that there is at least a short term momentum for the government to irrationally slash prices further in order to contain inflation at a time of rising production and regulatory costs," said James Shen, publisher of Pharma China.

That could force some of China's smaller drug makers out of business, Shen added.

"If the trend is short term, it can turn out to be beneficial for large companies, including multinationals and state-owned conglomerates since only they have the financial muscle to ride out the short-term difficulties," he said.

After the founding of People's Republic of China in 1949, healthcare was virtually free for urban residents under a cradle-to-grave welfare programme. Legions of "barefoot doctors" fanned out across the countryside to staff clinics run by communes and provide farmers with basic medical care.

But the government commercialised healthcare and education in the late 1990s to ease the heavy burden on state coffers.

A spate of suicides by patients who could not afford medical treatment and attacks on doctors in recent years forced the government to rethink its healthcare system.

The current administration has championed the have-nots of society, fearing hundreds of millions of ordinary people could become the source of anger unless grievances about price rises and unaffordable healthcare and housing are eased.

China has announced plans to complete landmark healthcare reforms by 2020, aiming to provide safe and affordable medical coverage for the country's 1.3 billion people.

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