Case Details

In recent years, the Chinese government has implemented significant reforms in its medical procurement system for public hospitals. These reforms include national negotiations for patented drug pricing and volume-based procurement for generic drugs. Traditionally, pharmacies were integral to medical services, and hospitals relied heavily on drug sales for revenue. This distorted incentive greatly inflated medical costs and drug prices, placing a significant burden on the government’s medical expenditures.

The new system leverages the state’s considerable power in managing the drug list under its public medical insurance scheme, requiring pharmaceutical companies to substantially lower their drug prices or engage in fierce bidding to gain market share. While the new system has achieved notable success in reducing drug prices, it has also drawn criticism from experts, doctors, patients, and pharmaceutical companies. If not properly addressed, these drawbacks could significantly impact the operation of the medical system and the long-term effectiveness of China’s medical reforms.