Healthcare Reform Priorities Include Insurance Expansion and More Price Actions

John Lenhart and Shunta Nagano

Increasing insurance coverage, improving service in state-owned hospitals, and controlling healthcare prices were key priorities outlined in a document recently released by the State Council’s Healthcare Reform Leading Group. The State Council published the 2013 edition of its annual Work Agenda for Deepening Healthcare System Reform on July 18, with Chinese media stating that this year’s reform priorities are more substantive than previous years. The State Council’s work agenda also includes new language asserting that “covert behavior” is driving up drug prices and vows continued actions to curb alleged corruption in the healthcare industry.

The Chinese government launched a broad campaign to reform the healthcare system in 2009, and has released work agendas every year to advance reforms. The reform goal has been consistent: providing universal coverage for basic healthcare by 2020. Specific policies to accomplish this goal have been left to the annual work agendas, which have often been somewhat vague. Chinese media noted that this year’s work agenda assigns specific tasks related to increasing insurance coverage, improving the country’s essential drug system, and further controlling the drug pricing system. The 2013 work agenda focuses on four main goals:

  • Expand insurance coverage The work agenda aims to improve coverage in already established insurance plans, promoting coverage in new areas, such as for serious illness and establishing improved emergency medical assistance systems.
  • Improve the essential drug system and aid local medical facilities The work agenda calls for standardizing implementation of the National Essential Drug Catalogue in localities across China, improving training of local medical personnel on what constitutes essential drugs, and providing aid to medical facilities that are struggling with costs in more rural and low-income areas.
  • Promote reform of state-owned hospitals The work agenda aims to improve the service conditions within state-owned hospitals and also change to more sustainable revenue models that reduce dependence on pharmaceutical drug sales as a source of revenue.
  • Advance other areas of reform The work agenda calls for increasing private investment in medical institutions, introducing information technology in facilities across the nation, and cracking down on corruption.

New language in the 2013 work agenda indicates that authorities will continue to investigate how companies interact with hospital officials, and the effects that may have on drug prices. Chinese media noted new terminology used in the document, which stated the need to investigate “covert behavior” in the purchase and sale of drugs. “Covert behavior” has not been mentioned in previous healthcare reform documents, and likely refers to bribes or other illegal activities by companies to influence sales or pricing of healthcare products. Officials have blamed bribery for driving up pharmaceutical prices. NDRC announced on July 2 an investigation of a large group of companies, both foreign and domestically owned, related to drug production costs and price setting mechanisms. Recent investigations by Chinese authorities of British firm GlaxoSmithKline have drawn international media attention in particular. The Chinese government has accused employees of GlaxoSmithKline of bribing hospital officials to purchase their products at higher prices. Investigations of companies in the healthcare sector are expected to continue. 

The Healthcare Reform Leading Group also used similar language contained in earlier reform documents that refer to goals to increase foreign investment into medical institutions and allow independently operated foreign medical institutions. Foreign-invested medical institutions were moved from the “restricted to the “permitted category in the 2011 edition of China’s Catalogue Guiding Foreign Investment, which effectively ended the former 70 percent equity restriction for foreign investment in medical institutions. Media reports also note that new pilot programs, including the upcoming Shanghai Free Trade Zone, will also encourage wholly foreign-owned medical institutions.