China announces subsidies to wean more hospitals off drug markups

China plans subsidies to curb hospital drug price markups.

China will splash out subsidies to expand a program to wean public hospitals from markups on drugs sold on site, easing concerns that a revenue shortfall would crimp other services.

The State Council said in a circular issued this week that it will spend RMB20 million each to add 100 hospitals to a pilot program for a total of RMB2 billion ($305 million).

The effort will bring a total of 200 hospitals into a program meant to cut drug costs for patients by halting the practice of indiscriminate prescription markups to boost revenues. Markups of 15% or more are common on drugs sold at public hospitals in China.

A pilot program last year ended those markups at 100 hospitals; at the time, China vowed to expand the effort nationwide in a phased manner.

The subsidies are part of a broader effort to restructure healthcare delivery at hospitals in the region. Doctors at major public hospitals face increasing patient loads and low pay, while patients may have to endure long waiting times for a consultation--problems China hopes to fix by getting more people to initially visit clinics and hiking salaries for medical personnel.

"The circular stressed deepening medical reform in public hospitals and the detailed measures involve improving management systems in public hospitals, deepening personnel system reform and establishing a favorable salary system," the State Council said in a statement.

The State Council also said the reforms to healthcare insurance coverage would go through so that patients can increasingly avoid out-of-pocket payments for basic services and get some coverage for more expensive critical and chronic health issues.

At the same time, the State Council vowed to track and trace drug costs and require caps on prices for key products, with initial details sparse on therapeutic areas.

- here's the State Council statement
- and a story from Reuters
- and a look by Bloomberg