China’s health reforms in 2013 may be bad news for pharmaceutical companies

In today’s post I have provided a translation of a widely distributed Chinese-language article on the future of the health reforms in 2013. It features the announcements of the MOH as put forth by State Council Vice Premiere Li KeQiang, Ministry of Health Minister Chen Zhu, and China Pharma researcher and China investment advisor JiangHua Yang. If the MOH’s best laid plans were to pan out for this year, there would be bad news and good news for businesses looking to make a charge into China’s private healthcare space.

The bad news is that for the coming year China’s Ministry of Health (MOH) is putting an emphasis on keeping drug costs down. According to the China MOH, this is happening in two ways.  The first way is expansion of the crackdown on physicians who profit from excessive drug sales (以药补医), setting a goal of complete eradication of the practice in 50% of all counties by the end of the year. Perhaps more intriguingly for pharmaceutical players, the key cost containment strategy is an announced effort to create drug purchasing organizations, led by the administrative organs of public hospitals, that will represent entire provinces in the negotiation process with select pharmaceutical companies. (As a side note it seems as if medical device manufacturers will be subject to participating in the same process). The drug bid process, too, looks like its set to stay.

The good news is that the MOH has for the first time explicitly stated clear targets for the development of private healthcare in the country. The most eye-popping figure is the goal that 20% of all hospital beds in China be private by 2015. But the most encouraging aspect of the report is the focus of the report on creating a regulatory and reimbursement climate that’s appropriate for for-profit players. All of this is contained within.

There is plenty of in between news, which we will, no doubt, be commenting on in the days to come.

This translation is my own, and if you have suggestions for how something could have been translated better, or if you have concerns that something is translated incorrectly, please speak out in the comments.

 

卫生部公布医改路线图 取消过半以药补医试点县

The MOH promulgates a reform roadmap, set to abolish excessive drug sales in more than half of all counties

继中共中央政治局常委、国务院副总理李克强1月5日在国务院医改领导小组上要求 “用改革的最大红利让广大人民受益”后，昨日(1月7日)，卫生部在2013年全国卫生工作会议(以下简称工作会议)上详细公布了医疗卫生改革的路线图。

In response to the January 5th demand of State Council Vice Premier Li KeQiang at a meeting of the State Council’s Medical Reform Leadership Group that “the greatest fruits of reform be used to benefit vast numbers of people”, yesterday, January 7^th, at the 2013 National Health Work Conference (henceforth referred to as the Work Conference) the Ministry of health promulgated a detailed road map for the ongoing health reforms.

“改革已经进入深水区和攻坚期，按照中央的总体布局，未来将从推进医疗保障、医疗服务、公共卫生、药品供应和监管体制这五个领域，展开综合改革。”在会议上，卫生部部长陈竺透露了今年的改革布局。

At the Work Conference, Ministry of Health Minister Chen Zhu disclosed the plan for the lay out of reforms this year. “The reforms have already entered deep waters and a critical period is upon us (“攻坚期” is a somewhat novel expression, akin to “D-Day” since it literally means the time at which fortifications are stormed), therefore the future, in line with the Central Committee’s overall position, will see the implementation of integrated reforms in five domains; medical insurance, medical services, public health, medicinal supplies, and supervisory/management systems.”

“每日经济新闻” 记者从这次工作会议获悉，为适应加快推进新型城镇化、统筹城乡经济社会发展的总体要求，陈竺提出，2013年取消以药补医试点县要达到全国县总数的50%以上，相关部门须尽快确定各项改革发展路线图和时间表，把任务细化为年度工作指标。

The “Daily Economic News” correspondent learned that in order to adapt to the accelerated speed of today’s urbanization, and to successfully orchestrate the demands of urban and rural economic and social development, Chen Zhu announced that by the end of 2013 the number of pilot counties implementing reforms that will prevent physicians from being compensated through drug sales needs to surpass 50% of all counties nationwide. The relevant departments will need to determine/develop, as soon as possible, their own reform and development roadmaps and timetables, and make sure that they are refined to reflect annual work targets.

 新农合政府补助增至人均280元

Government increases National Rural Cooperative Medical Scheme (NRCMS) benefits to 280 Yuan per capita

卫生部最新数据统计显示，2012年，中央财政共投入243亿元用于完善医疗卫生服务体系建设。全年新农合覆盖率超95%，人均筹资290元。去年1~3季度，20种重大疾病实际报销比达到66%，全年受益患者预计至少达到80万人。

The latest data from the Ministry of Health statistics show that in 2012, the central government invested a total of 24.3 billion Yuan to improve the medical and health service system infrastructure. The NRCMS total coverage for the year exceeded 95% of rural residents, and exceeded 290 Yuan per capita of coverage. Last year, from the 1^st to 3^rd quarter of last year, the actual reimbursement rate for the 20 critical diseases reached 66%. Throughout the year the benefits of these investments are estimated to have affected at least 80 million people.

而在基本药物制度改革及公立医院改革方面，陈竺透露，2012年基本药物制度已覆盖全国74.6%的村卫生室，全部政府办基层医疗卫生机构基本药物实现网上采购。全国已有600多个县的1000多个县级公立医院综合改革试点单位，17个公立医院试点城市探索管办分开、政事分开等体制机制改革。

Moving on to the essential medicine scheme reforms and public hospital reforms, Chen Zhu announced that the essential medicine scheme had already been implemented in 74.6 % of all village level medical organizations (村卫生室 is a term of the new reforms,  which now encompasses both Village Clinics [村卫生所] and Village Health Outposts [村医疗点]), and that nationwide, all essential medicines procured through government-run primary healthcare institutions can now be purchased online through those organizations. As for the hospital reforms, he announced that nationwide there are more than 1000 county-level public hospitals in more than 600 counties that are participating in an integration reform pilot program, as well as 17 public hospitals in pilot cities that are piloting programs aimed at better delineating 1) between regulatory functions of the state and the organizational functions of the public hospital itself, as well as delineating 2)  between governmental administrative functions and the organization’s own operational functions.

陈竺表示，2013年，取消以药补医试点要覆盖全国所有省(区、市)，试点县达到全国县总数50%以上，为2015年底在90%的县级公立医院和全部公立医院改革试点城市取消以药补医机制奠定基础。

Vice Premiere Chen Zhu expressed hope that by 2013 the reform pilot programs aimed at stamping out drug sale payments to doctors (以药补医) will be implemented in all provinces (including both autonomous regions and municipalities) and more than 50% of counties, thereby laying the foundation for implementation in 90% of county-level hospitals and in all public hospital reform pilot cities by 2015.

同时，卫生部还将鼓励社会办医，引导民营医疗机构差异化发展，与公立医院形成功能互补，实现每年非公立医疗机构床位数占比增加2~3个百分点，到2015年占20%以上的目标。

At the same time, the MOH will still encourage the development of the privately run medical industry. It will lead the development of private healthcare industry differentiation while also ensuring complementarity with public hospitals.  More over it wants to see the percentage of private beds in private settings to rise by 2-3% each year, so that by 2015 at least 20% of all hospital beds will be private beds.

卫生部还要求，2013年，新农合实际报销比力争比2012年的50%左右提高5个百分点，全国人均筹资要达到340元左右，其中各级政府补助增加到人均280元，参合率保持在95%以上。将国家基本公共卫生服务项目人均经费标准从27.2元提高到30元，将地广人稀边远地区人均经费标准提高到40元，分配比例原则上村卫生室不低于40%。

The MOH also wants to see the NRCMS 2013 reimbursement ratio increase by 5 percentage points over 2012’s reimbursement ratio, which was right around 50%. It further wants to see per person reimbursement levels rise to right around 340 Yuan, with 280 Yuan coming from government subsidies, while maintaining the nationwide NRCMS participation rate at above 95%. State funding for basic public health services will be raised to 30 Yuan from 27.2 Yuan, and the corresponding figure for sparsely populated rural areas will be raised to 40 Yuan. For the sake of fairness and equality (in society) all village level medical organizations will be receive reimbursements of at least 40% for NRCMS patients.

而在备受关注的大病医保层面，陈竺要求，须以省为单位全面推开终末期肾病、肺癌等20种重大疾病保障工作，在已开展大病保险试点的地区，要优先将20种重大疾病纳入大病保险范围，先由新农合按照不低于70%的比例进行补偿，对补偿后个人负担费用超过大病保险补偿标准的部分，再由大病保险按照不低于50%的比例给予补偿。

Turning to health insurance for diseases of serious concern, Chen Zhu said that provincial units must comprehensively implement working groups to address the public health security threat presented by the 20 critical diseases, like end-stage renal disease and lung cancer (these working groups typically are assigned to monitor data on the target diseases, as well as training health staff and organizing health units to deal with proscribed situations). In counties that are already piloting insurance programs directed at these critical diseases, it is important to prioritize the inclusion of the 20 critical diseases in the scope of insurance coverage. The available NRCSM compensation for them should amount to no less than 70% of the total bill, and if the required NRCSM pay out maxes out then the insurance should continue paying out for the 20 serious diseases at a rate of no less than 50%.

去年呼声颇高却迟迟未能露面的新版基药目录，随着工作会议的召开也再次成为关注的焦点。卫生部昨日透露，2013年，基层医疗卫生机构将全部配备使用基本药物；二级医院基本药物使用量和销售额都应达到40%~50%，其中县级医院综合改革试点县的二级医院应达到50%左右；三级医院基本药物销售额要达到25%~30%。

Despite last year’s high voiced calls for action, there was a failure to produce a new directory of essential drugs, and so the list once again became the focus of the Working Conference meeting. Yesterday, the MOH stated, that in 2013, every primary healthcare institution will be fully equipped with essential medicines; second-tier hospital’s drug usage and drug sales should receive 40-50% of the amounts needed; third tier hospital drug sales should reach 25-30%.

集团购买 压缩医药“水分”

Using Group Purchasing to Reduce the availability of Drugs which are nothing but “Water with Powder” (or Using Group Purchasing to Reduce the ineffectiveness of the current drug system)

此次工作会议还部署了今年的详细改革线路图，提出“从推进医疗保障、医疗服务、公共卫生、药品供应和监管体制这五个领域，展开综合改革。”

This time the Work Conference will also deploy a detailed roadmap for this year, it proposed to “Carry out comprehensive reform by focusing on the five areas of medical insurance, medical services, public health, drug supply, and regulatory system reform.”

“必须清醒地看到，要如期实现卫生改革发展目标，依然面临很多问题和挑战。”陈竺直言，我国基本医疗卫生制度仍不健全。对此，今年将大力推进和完善药品集中招标采购制度。通过集团购买、增强谈判能力降低流通领域的“水分”。探索由公立医院管理部门代表辖区内所有公立医院在省级集中采购的基础上，与药械生产经营企业进行带量采购，量价挂钩，最大限度降低药品价格。

“We must look at the problem with a cool head, because even if we are timely in bringing about the realization of reform goals, we will still have to face many problems and challenges,” Chen Zhu said, noting that China’s basic medical and care system is still not sound. On this topic, this year we’ll see the vigorous promotion and strengthening of the centralizing bid and procurement system for drugs. Through the use of group purchasing, and strengthened negotiating power, this effort will reduce prices.  The foundation of the approach will be to use public hospital administrative departments as representatives of all hospitals in a provincial zone during the purchase negotiations process. These representatives will then purchase in bulk from medical production enterprises (I’ve translated “药械” as medical production enterprises, which has in the past referred to manufacturers of drugs, medical devices, hospital equipment manufacturers), making purchases based on both volume and price. This will maximize the ability of hospitals to get the lowest possible price on drugs.

中投顾问医药行业研究员蒋华阳认为，此举对于规范药品流通将发挥重要的作用，且随着药品定价的市场化逐步深入，完善药品采购要发挥医疗机构作为谈判一方的主动性，允许医疗机构在中标范围内选取医药企业进行自主谈判和采购，在最终售价上要有所规范。进一步鼓励企业或非营利性组织为医疗机构提供药品集中询价和采购服务，政府应进一步构建平台加强医药采购信息的收集和发布。

Chinese investment advisor and pharmaceutical industry researcher JiangHua Yang believes that the move related to the regulation of drug distribution will play an important role. At the same time the marketization of drug prices deepens, and the system of drug procurement is improved, it will be important to bring the ability of medical and healthcare institutions to negotiate into play, and allow medical organizations who are in bid range of select pharmaceutical companies to carry out their own negotiations and purchasing, as well as to have a say on final order specifications once a price is reached. To go even further in encouraging enterprises or non-profit agencies to provide centralized inquiry and procurement services, the government should step up efforts to build platforms that will strengthen collection and distribution of pharmaceutical procurement information.

陈竺透露，将尽快按照中央推进新型城镇化、统筹城乡经济社会发展的总体要求，整合基本医疗保障制度筹资、服务、经办和管理职能，形成责任主体明确、利于控制费用的卫生行政管理体制。并将着力控制大型公立医院单体规模扩张，为民营医疗机构留出发展空间，实现2015年非公立医疗机构床位数占比20%以上的目标。

Chen Zhu disclosed that according to the Central Government, the promotion of new urbanization, the coordinated planning of the basic requirements of urban and rural development, and the integration of basic medical insurance financing, services, management and operational capacities will lead to a clear delineation of main duties, and will help control the fees of the healthcare administration management system.  Effort will also be put into controlling large-scale public hospital unit expansion, so that room can be set aside for the development of private medical organizations, and so that by 2015 the goal of having 20% or more of all beds in China to be private can be reached.

社会办医利益回报受关注

Private healthcare institution’s interest in a return requires our full attention

蒋华阳认为，总体来看，2012年的卫生资源结构配置比较合理，城乡和地区间卫生发展差距有所缩小，医疗设施等基础性服务设施得到改进。但2013年，卫生工作在医保支付制度、进一步理顺补偿机制、基层医疗卫生机构建设等方面仍面临挑战。

Overall, said JiangHua Yang, the configuration of the health resource structure was relatively reasonable, the development disparities between rural and urban areas narrowed, and medical facilities and other facilities improved.  However, in 2013, the medical insurance payment system, the further adjustment and improvement of the compensation system, and the construction of new primary care institutions will all face challenges.

在深化卫生改革的五个层面中，医保支付方式改革仍是一大难题。蒋华阳表示，医保支付方式改革虽有利于破除以药补医的不良现状，但也让一些转型能力不足的公立医院面临一定的障碍，各级地方政府财政支出也面临一定压力。我国医药费用逐年上涨，医保控费形势严峻，应对这一挑战需要政府层面给予政策及资金方面的支持；需要医院自身加强经营水平，提高适应市场的能力。

On the matter of the five key aspects of the 2013 health reforms, medical insurance payment reforms remain a big problem. JiangHua Yan said medical insurance payment method reform, although helpful in getting rid of the undesirable status quo of drug sales payments going to doctors, also makes it so that public hospitals unable to adapt are sure to face challenges. Local government expenditures are also facing pressures. In short, China’s healthcare costs are rising year by year, and the medical insurance payment situation is grim. In order to meet this challenge, government powers must provide help on the policy and finance side of the equation; hospitals themselves must strengthen their operational capacity and raise their ability to adapt to the market.

蒋华阳还表示，若想实现非公立医疗机构床位数占比20%以上的目标，须厘清社会办医机构的利益回报问题。社会办医的营利性机构和非营利性机构在享受政策优惠方面已经体现了一定的差别，非营利性医疗机构享受的政策优惠待遇要明显高于营利性机构，但非营利性医疗机构不能实现利润的分红，而营利性机构则相对灵活。同时营利性机构的服务群体主要为高端客户，以发展高端医疗服务为核心竞争力。“应尽快根据二者的自身经营特点和水平，探索制定适应市场竞争发展的薪酬利益回报机制。”蒋华阳对《每日经济新闻》记者表示。

JiangHua Yang also said, if we wish to reach the goal of 20% private beds, then we must clarify upon issues of importance to private medical institutions. Private hospitals and nonprofit institutions are already enjoying preferential policies that reflect definite differences. Obviously, the policy advantages enjoyed by non-profit institutions are higher than the advantages enjoyed by for-profit institutions, but non-profit institutions cannot realize dividends, and this advantage makes for-profit institutions more flexible. At the same time, the services of for-profit organizations are mainly for high-end customers, and they develop high-end medical services as their core area of competitiveness. “As soon as possible, according to each type of organization’s operational characteristics and operational level, explore the creation of a payment/profit return mechanism that will help the organizations adapt to the development of a competitive market place.