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Irreducible drug prices
2006-09-01
China Daily
Like a modern Sisyphus, China's pricing authorities have been making unremitting efforts to cut down medicine prices.
This indicates that the public's chronic complaints about increasingly unbearable medical bills have caught policy-makers' attention.
Unfortunately, much like the unruly stone that frustrated Sisyphus in Greek mythology, drug prices in the country always find a way to spring back immediately after each round of price cuts.
For the 19th time in about a decade and the second time this year, the National Development and Reform Commission recently slashed the prices of a large number of drugs.
It was reported that the average price of 99 antimicrobial drugs would decrease by 30 per cent, and annual savings from the price cut are estimated at 4.3 billion yuan (US$54 million).
To ensure that hospitals, the country's main distribution channel for drugs, will keep to the new prices, the commission also vowed to inspect them very soon.
Yet even before the public became aware of the benefits of the latest drug price cut, the domestic press found that those medicines to be sold at lower prices had suddenly disappeared from the market in some cities.
No mistake. It means neither that patients in these cities are no longer in need of those drugs, nor that pharmaceutical factories are giving up local markets.
Observation based on past experience indicates that, more than likely, this precedes the emergence of a batch of "new drugs" - really new bottles with old wine.
By applying for the approval of "new drugs," pharmaceutical plants can easily circumvent the price cuts and price their products - which often differ merely in name, dose or packaging from the original ones - individually and thus expensively.
Given the cut-throat competition between numerous domestic pharmaceutical companies, it seems unthinkable that they would keep the price so high.
However, a close look at the country's healthcare system shows how the pricing authorities' Sisyphean efforts are misplaced.
It is no secret that to fund most hospitals, which are severely underfunded by public finance, the government has to allow them to charge an extra fee on the drugs they sell. And as that fee is limited to no more than 15 per cent of the cost of drugs, hospitals' preference for expensive drugs becomes self-evident. The higher drug prices are, the more profit hospitals can make.
Hence, if the government will not substantially increase financial input to wean hospitals off their reliance on profits from drug sale, pharmaceutical factories can hardly resist the temptation to cater to hospitals' preference for expensive drugs.
The pricing authorities should not focus their endeavour merely on the price tags of specific drugs. The really crucial policy goal is to reduce the financial burden on patients.
Unless the government can come up with a comprehensive solution to address the currently distorted relations between patients, pharmaceutical businesses and hospitals, the stone of high-priced medicine will keep rolling down, sadly, onto the public's back.
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