China launches beginning of the end of drug markups at state-run hospitals

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China’s National Development and Reform Commission (NDRC) has launched the latest phase of a massive effort to end markups for prescription drugs sold at state-run hospitals. The effort has expanded from 100 centers previously across the country at the beginning of the year to 200 centers. It's slated to cover all units by 2020.

State-run hospitals and clinics relied on markups of around 15% to fund operations, but policymakers said it led to over-prescribing and skewed therapeutic choices made by doctors.

The move to end the markups nationwide was flagged earlier this year and in April the government said it would use subsidies to cushion the financial blow to hospitals to avoid cuts in other services. The NDRC guidelines are key, however, because the agency has wide-ranging powers over prices and antitrust policies in China.

“Markups on drug pricing used to be a reasonable track for hospitals to generate income in the past because of low public funding, but it has become a skewed incentive that increases the cost for patients. Hospitals tend to prescribe expensive drugs,” Zhu Dezheng, head of the commission’s drug pricing division, said in a release posted by the State Council.

He added that some hospitals counted over 40% of income from drug price markups.

The government, however, said it did not expect the revenue shortfall from the end of markups would hit patients, though prices for some hospital services now will move to market rates, the NDRC said, reflecting demand and costs that may previously have been covered in part by the earnings from drug sales.

Patients in China often rely on touts to get faster appointments at the biggest state-run hospitals in China, with the rush to get treated at major urban centers in Shanghai and Beijing seen as the best options--but in a practice that overwhelms doctors and staff.

Instead, policymakers hope to change the dynamic by getting patients to head to clinics first and then move to more full-staffed facilities based on the initial diagnosis.

- here's the release
- and a story from China Radio International

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