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HomeHealthChina: Health-care reform is a top national priority

China: Health-care reform is a top national priority

In 2009, China began its health-care reform. The system’s transformation is expected to be completed by 2020. Already significant progress has been made in areas like the development of infrastructure in China’s low-income cities and rural areas. Additionally, enrollments in insurance plans have increased to more than 95 per cent of the population. However, several key elements of reform remain stalled, including programs such as Essential Drug Lists and overall reform of public hospital funding. In late 2011, Vice Premier Li Keqiang spoke out to highlight the government’s commitment towards health-care reform. His goal is to “erect a universal basic Health insurance in China system that provides safe, effective and convenient health-care services for all by 2020.” He also acknowledged the difficulties associated with reforming public hospitals.

The next stage of reform, we believe, could have a significant impact on all aspects of the health-care system. This includes market access and insurance coverage as well as the development of primary-care infrastructure. We will examine each aspect.

Insurance coverage: It’s more comprehensive, but can it go as deep?

China’s government insurance programs expanded coverage to over 95 percent of the population in a matter of years. However, coverage is still very limited. For example, only a third of the country’s provincial governments provide basic outpatient coverage. The coverage is limited for those who do have it. Outpatients in Shanghai are responsible for paying 30 to 50% copayments and a $240 deductible. Due to strict reimbursement caps and low reimbursement for expensive drugs, patients’ out-of pocket expenses are still high.

Existing insurance plans face increasing pressure due to a mismatch of contributors and non-contributors. The Shanghai government has capped at 7 percent the increase in basic medical insurance funding in 2011, and has reduced pharmaceutical spending as a percentage to 42 percent from 45 percent the previous year. This is especially striking considering Shanghai is one the country’s most wealthy cities. Similar policies are being implemented all over the country to contain rapidly rising health-care expenses. This means that pharmaceutical companies may find their drugs restricted when hospitals have limited budgets.

The national government has made remarkable progress in expanding its insurance coverage. Now, the focus will shift to providing better care to patients. Annual caps will rise and reimbursement copays will continue decreasing. Inpatient copays will continue to fall and the annual caps will rise. For example, the central-government funding for New Rural Cooperative Medical Scheme (which covers over 800 million people) will go up from $20 to $40 per person annually. The availability of outpatient care will improve as more provinces will offer universal coverage. Additionally, more diseases will be covered under reimbursement programs for outpatients with chronic illnesses. As in other countries, increasing government contributions to health care spending will result in a greater focus on limiting its growth and increasing intervention at different points of the system.

Access to the market: Complexity increasing

Multinationals have to deal with an increasingly complex market-access environment. Throughout the whole range of commercial activities–product registration, reimbursement, tendering, pricing, and distribution–China’s market-access picture shows increasing fragmentation. Access conditions can vary from one province to another, at the local level, or even at the hospital level. This affects both pharma and medical-product businesses.

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