context: In the wake of an abrupt reopening, waves of COVID infections have left residents scrambling for a range of medicines, including Pfizer’s Paxlovid. An emerging black market that has cashed in on the surging demand has seen prices for a box of Paxlovid once soar to C¥50,000, over 20 times the original price. Alert to rampant price gouging, authorities announced a new pricing mechanism for COVID medicines in a bid to oversee the unregulated market and meet the growing demands of patients.
NHSA (National Healthcare Security Agency) announced trialling a new pricing mechanism for COVID medicines on 6 Jan 2023, highlighting three principles including
- prices set by enterprises themselves
- joint management and supervision by
- enterprises
- medical institutions
- the pharmaceutical industry
- healthcare security departments
- comprehensive pricing guidance
Lattitude Health, a PRC healthcare-specialised think tank, unpacks the new policy and points out that the directive sheds light on a new pricing mechanism that is different to centralised procurement and annual talks to adjust the catalogue of medicines covered by BMI (Basic Medical Insurance). These two have been the main policy tools to slash drug prices. The new document will help the market understand future policy direction. Allowing leeway for enterprises to set the initial price, new rules also outline a few benchmarks to prevent overpricing. For instance, R&D costs should be spread over no less than five years when deciding the price. This requirement is not limited to drugs developed for inpatient services. Regulators set the standard high as they see the strong demand will keep the costs low, notes the think tank. Price adjustment will be contingent on sales of a COVID drug among other factors, indicating a key principle of the mechanism—higher sales in exchange for a lower price. Regular price reviews and adjustments will help reduce the burden on patients and BMI funding, writes Lattitude Health. Authorities have promised certain COVID medicines qualified for BMI reimbursement until 31 March this year, according to an NHSA announcement on 7 Jan 2023.