China removes barriers to affordable medicine as health reform gathers pace
Government removes barriers to accessible and affordable medicine
Beijing legalised the sale of prescription drugs through online platforms in January. It is the next phase in a package designed to break hospitals’ grip over the country’s 1 trillion yuan (HK$1.24 trillion) pharmaceutical market, which has been beset by corruption and price manipulation.
Last year, the bribery investigation into drug maker GlaxoSmithKline led to almost US$500 million in fines. By allowing e-retailers to sell directly to patients, the government aims to reduce the cost to consumers. It will also give foreign companies unprecedented access to one of China’s fastest-growing markets.
“Since 2008, a lot of measures have been taken to push reform forward,” says Ernan Cui, senior analyst at Beijing-based economic research house Gavekal Dragonomics. “The objective of the government is to let doctors and hospitals earn more from health care services and less from drugs sales.
“MNCs [multinational corporations] can participate in several parts of the process,” Cui says. “This is good news for foreign manufacturers upstream and established players in China, because the move will open the market and reduce transaction costs for selling drugs. However, it will be highly regulated with strict background checks. Domestic companies are still dominating [this space].”
With China’s urban population expected to reach 1 billion by 2030, the need for accessible and affordable medicine is mounting. Yvonne Wu, health care industry leader of Deloitte China, says: “Online sales can provide improved access to remote places and lower-tier cities. In order to equalise access to health care for the whole nation, the government is trying to promote the online sales model.”
According to Economist Intelligence Unit (EIU) statistics, sales of prescription drugs in China in 2014 totalled US$99 billion. The estimated figure for 2018 is US$193 billion, making China the world’s second largest pharmaceutical market after the United States. Access has been opening gradually through piecemeal reforms and pilot schemes.