context: The plan builds on successful local practices and targets both supply and demand. Its nationwide implementation will speed up consolidation of the generics market and public hospital reforms.

State Council General Office issued ‘Plan for centralised pharmaceutical bidding and procurement pilot program’. The plan legitimises trial practices of centralised tendering and bidding organised in November-December 2018 in four municipalities and seven cities (Beijing, Tianjin, Shanghai, Chongqing, Shenyang, Dalian, Xiamen, Guangzhou, Shenzhen, Chengdu and Xi’an). It specifies

  • eligible pharmaceuticals
  • eligible firms
    • licenced domestic manufacturers
    • agents or distribution companies of import drugs
  • selection criteria
    • quality: clinical efficacy, adverse effect, batch stability equivalence, BE testing
    • production and supply capacity
  • procurement methods
    • three or more qualified manufacturers: via competitive bidding
    • two qualified manufacturers: via price negotiation
    • only one qualified manufacturer: via acquisition negotiation

Principles of management are

  • attaching volume purchasing commitment to given bid
    • 60 to 70 percent of annual pharmaceutical consumption in public hospitals in given pilot region
  • prioritising clinical utilisation of procured products in public hospitals
    • used within one year
  • guaranteed supply
  • prompt payment
    • minimum 30 percent of total payment to be pre-paid to manufacturers by health insurers (medical insurance funds) under global budgets

Supplementary measures to reform the healthcare sector include

  • aligning health insurance reimbursement standards with bid prices
  • reducing share of pharmaceutical spending in total healthcare expenditure and increasing employee remuneration in public hospitals
  • rationalising prescription

The state will form a centralised procurement workgroup and a consortium purchasing office to manage the pilot.