SHANGHAI - In an effort to reduce drug prices, China will cancel drug adjustment fees in hospitals as part of its health care reform plan, the Ministry of Health announced during a press conference here Jan. 12.

"The drug adjustment fee, which was implemented in the 1950s, will be canceled in the new health care reform. The fee has played an important role in maintaining the operation of the medical institutions," Ministry of Health Spokesman Mao Quanan said, "but the adjustment fee currently leads to public health workers prescribing higher-priced drugs, which increase the medical expense to patients."

The drug adjustment fee enables hospitals in China to add 15 percent to drug prices as income, providing doctors incentives to prescribe higher-priced drugs. In China, most patients prefer to purchase drugs from hospitals rather than from drugstores.

"Expense on drugs in China has taken more than 50 percent of total personal medical expenses, which is much higher than other countries - the ratio is usually around 20 percent in many countries," Mao said.

Income from drugs accounts for a big percentage of total income for hospitals, according to the spokesman, who said the MOH will issue a new policy to ensure smooth operation of hospitals. A medical service fee is one of the solutions that is under discussion, the spokesman said.

The medical service fee will add a small amount to the drug price without having any bearing on the original drug price, according to a related document drafted by the National Development and Reform Commission.

"The public hospital reform is a complicated and arduous task. It is not a single policy change. It must be a system reform [based] on the financial operation policy," Mao said, adding that other regulations will be needed to adjust the medical service fee and implement a national basic drug system that would complement the new changes.

The basic drug list of 2009 will be issued by the MOH, which will detail how to designate sites to manufacture basic drugs under the list, how to purchase the basic drugs and how to ensure that medical institutions prescribe the basic drugs under the list, according to Mao. Basic drugs listed by the government are lower-priced brand and generic drugs purchased by the government and directly distributed to hospitals.

Chen Zhu, director of MOH, unveiled five key points to implement the new reform in the next three years, during a Jan. 8 MOH conference. MOH will:

Promote the basic medical insurance system;

Establish the basic drug system;

Build medical service sites in rural areas;

Prevent and treat serious diseases; and

Facilitate pilot projects for public hospital reforms.

"MOH will select some cities as pilot sites to implement the public hospital reform in the next three years," Chen said.

The reform will involve the management system, compensation system, operation system and infrastructure of the public hospitals. The MOH will also set up supervision departments in hospitals to monitor operations, according to the MOH head.

The government will provide financial support to hospitals for public medical services, and the loss of the income for hospitals from canceling drug adjustment fees will be made up by medical service fees, raising technical service fees and more government investment, Chen noted.

The medical service fee can also be reimbursed by basic medical insurance, according to Chen.

"MOH will raise the standard charge for technical services and lower the charge for drugs, medical consumables and diagnosis," Chen said.

Shanghai has implemented a zero mark-up pricing plan on basic drugs since 2007. Last year it covered all 232 community medical service centers in Shanghai with 166 basic drugs. Annual patient visits to these centers have reached 40 million, which account for one-third of the total visits, according to the Shanghai MOH.

Patients can save 165 million RMB ($24 million) every year by purchasing drugs in these centers, according to Shanghai Health Bureau Director Xu Jianguang.

Basic drugs covered will be expanded to more than 300 Western drugs and 300 TCMs in the 2009 basic drug list, Zhao Zilin, director of the planning and finance division under MOH, told the local media.

-Dai Jialing (j.dai@elsevier.com)

China Nixes Hospital Adjustment Fees As Measure To Reduce Drug Prices

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