context: The press conference reiterated pilot project objectives, characteristics and implementation measures laid out by NHSA in an 8 Dec 2018 briefing. It demonstrates again the capacity of NHSA, as the ‘end buyer’ of healthcare services connecting drugmakers and care providers, in initiating and implementing reform measures throughout the healthcare sector.

State Council Information Office held a press conference explaining State Council’s ‘Plan for piloting centralised bidding, procurement and utilisation of pharmaceuticals in 11 cities’.

Chen Jinfu 陈金甫 National Healthcare Security Administration (NHSA) deputy director-general stated the main goals of the pilot are to

  • cut drug prices via optimising tendering, bidding and procurement procedures
  • reduce drug marketing costs and eliminate kickbacks associated with multiple rounds of price negotiation by attaching volume purchasing commitment to a given bid
  • address over-prescription and markups in public hospitals
  • establish market-driven drug pricing mechanisms

The pilot is different from previous bidding and procurement schemes as it incorporates

  • supply volume commitment from pharmaceutical manufacturers, based on estimated costs and profits
  • demand volume commitment and clinical utilisation commitment from public hospitals
  • quality commitment
  • commitment of prompt payment to distributors and manufacturers

Chen explained the rationale of healthcare reform behind the plan, covering

  • changing provider payment methods
    • harmonise health insurance reimbursement rates and standards with bid prices (including off-patent originators, reference listed drugs and generics passing bioequivalence testing)
  • realigning staff incentives
    • public hospitals qualified to perform evaluation can claim residual of healthcare budgets (after bid price cuts) to increase salaries of doctors and charge of care services
  • promoting clinical use of low-cost generics
    • NHC will
      • adjust clinical practice guidelines for use of generic medications
      • no longer cap share of pharmaceutical spending in total healthcare expenditure
    • delinking hospital income and staff remuneration from drug revenues
    • allowing more than two manufacturers (two brands) seated in hospital formulary for any given drug with a specification

Measures to ensure implementation include