As of June 1 2015, the vast majority of drugs in China – except for narcotic and Type 1 psychotropic drugs – are free from government-set pricing. This drug pricing policy reform was announced by the central pricing authority, the National Development and Reform Commission (NDRC), and other administrative authorities jointly on May 4 2015 with the release of the Circular Concerning Opinions on the Enhancement of the Drug Price Reform (NDRC Price 904). According to the circular, the NDRC aims gradually to establish a market-driven drug pricing system and minimise the government's direct intervention in drug pricing. The circular divides the reform of the drug pricing system into five principles for different types of drug:
- Drugs reimbursed by Basic Medical Insurance (BMI) funds – prices will be established on the basis of reasonable medical reimbursement standards by the BMI administrations together with other authorities.
- Patented drugs and drug products with exclusive sources of supply – prices will be determined through a transparent and multilateral negotiation mechanism.
- Blood products not listed in China's National Reimbursable Drug List, immunisation and vaccines purchased by national centralised procurement, national free antiretroviral treatment for HIV and birth-control drugs and devices – prices will be determined by government procurement or negotiations.
- Narcotic drugs and Type 1 psychotropic drugs – the government will continue to set the maximum ex-factory and retail prices.
- Drugs not in any of the above categories – prices will be set by the manufacturers based on production costs as well as market demand and supply.
While the NDRC will ultimately allow the market to decide on drug pricing, it will increase the frequency of price surveillance in the future, most likely by monitoring drug prices and enforcement against unlawful pricing behaviour.
Since 2000 the government – especially the NDRC (formerly known as the National Planning Commission) – has played a key role in the drug pricing system by setting the 'government-guided prices' or the maximum retail price. Therefore, the reform will undoubtedly be deemed the biggest change in the Chinese drug pricing system in years. According to an anonymous NDRC spokesman, although some drug prices may increase due to production costs or market demand, the NDRC expects that most drugs will not experience a rapid price increase.
For further information on this topic please contact Katherine Wang at Ropes & Gray LLP by telephone (+86 21 6157 5200) or email (firstname.lastname@example.org). The Ropes & Gray LLP website can be accessed at www.ropesgray.com.
ILO - This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.