China lifts price controls on pharmaceuticals

Chinese premiere Li Keqiang announced on thursday a lifting of price controls on pharmaceuticals though no specific time-line was set as to when this might happen. On one hand the decision undermines China’s initial policy of making medicines accessible to all consumers from cities to countrysides yet on the other it is seen as necessary as pharma companies would only fight to offer better drugs when they are able to charge steep premiums for it.

This decision has been brewing for some time now. In April last year, China removed price caps for certain drugs, including Tapazole, used in treatment for hyperthyroidism, after receiving harsh criticism that its price controls were resulting in shortages of the drug. Many other drugs face similar disappearances from shelves as pharmaceutical companies deem it not economically viable to produce them and sell them under these price restraints. More worryingly, as seems to often happen in China, reports on local manufacturers using cost-cutting materials such as leather scraps in the making of gelatin capsules, have led to an increase in carcinogenic material in pills.

The Chinese government however is expected to still enforce controls in ensuring drug spending does not get out of hand. A vast majority of drugs are sold through hospitals in China where suppliers are chosen through provincial bidding systems geared to keeping costs low. The management of these bidding processes however have been criticized for having variable evaluation criteria from state to state, and pharma companies have been known to try to “influence” the physicians or experts on the bid evaluation board. It also takes up to 18 months from submission to hospital listing which may act as a deterrent for many pharmaceutical companies. Efforts are now being made to streamline this process.

China still holds an enormous share of the world market though and spending on pharmaceuticals range in the 600 billion dollar range and will likely increase as the region develops.

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