Friday, 12 September 2014

Doctors lose, retail pharmacies win as government cuts the hospital monopoly on dispensing

by Michael Woodhead
The Chinese government appears to have side-stepped the influential doctors' lobby and the tame health ministry by using the Ministry of Commerce to tackle the perennial problem of drug sales commissions and the inflated cost of medicines.

Doctors in China rely for much of their income on commissions and bonuses from sales of pharmaceuticals, and previous efforts to curtail the profits have been stymied by medical lobby groups. The Ministry of Health, previously led by a medic Dr Chen Zhu (who now heads the Chinese Medical Association), has managed to block or delay previous efforts to tackle the drug commissions problem.

Now the government has turned to the Ministry of Commerce to introduce new rules that separate medical services and drug sales in 34 pilot cities across the country, in an attempt to lower the high cost of medicines. The National Health and Family Planning Commission (which absorbed the Ministry of Health last year) has been sidelined by the move, a sign that its own efforts at reform have failed.

Under the new Ministry of Commerce plan, major city pharmacies will replace hospital pharmacies as the source of prescription drug dispensing, putting an end to the lucrative 'gold mine' of revenue for hospitals. In theory, this will mean that hospitals should no longer pressure their doctors to prescribe more and reach quotas to boost revenue via the hospital pharmacies. And by breaking the hospital pharmacy monopoly, the new plan will lower drug prices by encouraging competition between pharmacies.

According to Caixin, previous efforts to break the drug sales-hospital income link have failed because of entrenched opposition from the former Ministry of Health. The ministry pushed a plan under which local governments purchased pharmaceuticals on behalf of local hospitals, but this scheme was ineffective in breaking the stranglehold of hospitals on drug demand and also proved to be yet another channel for corruption.

 The new scheme will also permit more pharmacies to become eligible for reimbursement under the various medical insurance system. These moves will further increase diversity and competition and give pharmacies a boost in business, commentators say. However there has been no analysis of how public hospitals will make up for the huge gap in revenue when their lucrative pharmaceutical monopoly is snatched from them.

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