SHANGHAI - China's Central government announced it would invest RMB 118.1 billion ($17.3 billion) for healthcare reform in 2009 during a joint working meeting April 20 with the National Development and Reform Committee, the Ministry of Health, the Ministry Of Finance, the Ministry of Human Resources and Social Security and the State FDA.

The three-year goal for drug price reform consists of measures to perfect the drug-price management policy, adjust both drug prices and medical service fees and step up monitoring of drug prices, NDRC Director Zhang Ping said.

"In 2009 the main task is to establish the essential drug system and reform in the public hospitals," he said. The first step will be to set a retail price guideline for essential drugs. The second step will be to cancel drug adjustment fees in hospitals, and then issue a new scheme for drug-price reform and medical service fees.

Zhang said RMB 10 billion ($1.46 billion) will be allocated to set up 480 township hospitals, 1,993 medical institutes in rural areas and 1,154 medical service centers in urban areas.

"The government subsidy to people in the countryside will be raised to RMB 120 [$17.50] per person from RMB 80 [$11.7]," said Minister of Health Chen Zhu.

China earlier this month unveiled its three-year plan for healthcare reform, which earmarks RMB 850 billion ($124 billion) from 2009 to 2011 (Also see "China Issues Three-year Healthcare Reform Plan To Invest RMB 850 Billion" - Scrip, 8 April, 2009.).

But Li Bin, executive director of research at Morgan Stanley, told PharmAsia News he was skeptical because the "math just does not make sense."

He explained that government total spending for the healthcare sector in 2008 was RMB 283 billion and for 2009 was RMB 342 billion, with an increase in 2009 of about RMB 59 billion. If the total RMB 850 billion is incremental for 2009 to 2011, the increase would be RMB 791 billion or about RMB 395 billion [$58 billion] each year for 2010 and 2011.

"Is it possible for example in 2010, the government will spend RMB 737 billion [$107.6 billion]? Very unlikely, in my opinion," Li added.

"Based on the latest government data, the central and local governments are expected to pay about RMB 100 billion [$14.6 billion] in 2009 as an insurance premium for rural area insurance. This represents a 68 percent increase over 2008. Meanwhile, the central government plans to spend RMB 16.5 billion [$2.41 billion]in 2009 for infrastructure improvements and equipment purchases - a healthy 150 percent over 2008," Li said in his report.

"Both growth rates are higher than our earlier expectation of 20 to 30 percent year over year. This data should bode well for low-end drug and device makers," he said.

Glenn Hou, a consulting director for Frost & Sullivan concurred, noting that "local diagnostics companies will benefit most in the reform." (Also see "Medical Device Sector Expected To Gain The Most From China’s Healthcare Reform" - Scrip, 3 April, 2009.)

However, Li is cautious on the recent numbers because "it will take some time for companies to benefit from government spending; and the economic slowdown is showing a negative impact on China sales and export revenues."

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

China’s Central Government To Invest $17 Billion In Healthcare Reform In 2009

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