Vivian Chen, Director of Healthcare Economics, RDPAC

 

Some words stick out in the report of 17th NPC and CPPCC Congress, “establish national essential drug policy, and ensure public access to essential drugs” as they were incorporated into the section titled “accelerating to build a “harmonious society” which improves livelihood of Chinese”.

Government Priority in Reforming China’s National Medicine Policy

In his report to review the government’s annual and budgetary plans, Premier Wen Jiabao emphasized four major tasks to drive forth healthcare reform this year with development of national essential drug policy as one of the four tasks set forth.

On Jan 30th this year, at the national conference on food and drug regulation, establishing national essential drug policy was once again put on top of agenda for SFDA in the coming year. Through the working report of SFDA Commissioner Shao Mingli, it is evident that SFDA has set foot on this fast track.

In March 2008, the State Council released its plan to reform the government agencies under it. Among its moves to restructure a number of central government agencies, the State Food and Drug Administration (SFDA) will be downgraded from a direct-subordinate of the State Council to a subordinate of the Ministry of Health (MOH). The SFDA will remain an independent government agency but will be under the governance of and report to the MOH rather than the State Council in future.

"The national essential drug list has been updated every 2 years since 1996. The latest update will be released once the overall health reform scheme is publicized soon", Bian Zhenjia, DG of Drug Safety and Inspection Department of SFDA made these remarks when talking about selection and development of national essential drug list. He said that, the authority will be able to select the scheme before mid Feb and will try to publicize the latest version before July this year.

"We will work with departments concerned in the first half of this year, to review major diseases, common and frequently-occurring diseases, to select drugs for the national essential drug list, optimize drug mixture and structure, consolidate the national list and formulate supporting regulatory policies”, as reported by Commissioner Shao Mingli.

Upon intensive preparation in 2007 on principles, scope, quantity, shortlist, and variety readjustment, a brand new national list is expected to come out in 2^nd half of 2008. “List development is only the first step for developing the national essential drug list system”. Bian Zhenjia said, in his opinion the “right” of public access to essential drugs is the essence of the entire system. The national drug list shall have its legal implication and status. To Bian, “that shall be the most fundamental list at national level, which shall be observed by all parties, be it producer, distributor or users. Reimbursement lists for BMI, UCMI and RCMI schemes (Editor’s note: urban employee basic medical insurance, urban resident basic medical insurance and rural cooperative medical care schemes) shall fall into its umbrella, with their drugs selected within the national list. Such practices have been proven successful in the world.”

The list will be publicized soon, a milestone in establishing the national essential drug list system. A favorable policy will benefit competent pharmaceutical companies which enjoy established brand (largely generics), deliver quality products and achieve scale production, so that the system will sustain its development and people will get tangible benefits.

It is reported that SFDA will continue developing and publicizing essential drug list targeting urban communities and the countryside, to ensure adequate supply of cost-effective drugs. In the meanwhile, SFDA will work with relevant government departments to consolidate essential drug list system, and harmonize accredited production practices with the national essential drug list system.

Policy Rationales

For a long time, the national essential drug system has been perceived in China, as a fundamental system to address many concerns such as market disorder, excessive price, unjust transaction, and commercial bribery. The current pattern with small-scale production and too many producers and public affordability of "costly" drugs are two key challenges for government regulation over pharmaceutical industry. Therefore, with essential drug system in place, government can greatly reduce drug burdens over people, improve availability of essential drugs. Name and price of drugs of the same type will be regulated. Market access shall be strictly scrutinized and quality control be enhanced to ensure delivery of safe and effective drugs. Scale and modern production will be promoted. Drug distribution orders will be rectified. In light of specific natures of medicines, production and distribution of drugs shall take into account public interests, and therefore can not be wholly regulated through market. Government shall intensify regulation over drug production, procurement, distribution and utilization.

China observes the same design in conceiving its national list. National essential drug system is the core of drug policies, and an important instrument to ensure public access to essential drugs. Despite of intensive workloads and challenging task, the Chinese government looks determined to develop an essential drug list compatible with health system reform, and the rigid principles of “clinical necessary, safe and effective, reasonable price, and convenient to use”.

Scope of Essential Drug List

The upcoming list differs from existing ones in that drugs covered will be reduced substantively from over 2,000 types to around 400 types, in consistency with essential drug list practices of WHO and other countries.

Essential drug list of WHO and other countries normally cover 300 to 400 types of drugs. WHO recommended list covers 312 types of drugs, Japanese over 200 types and Thai over 80 types. In contrast, China’s existing list covers over 1000 traditional Chinese medicines and over 900 Western medicines, much higher than other countries.

"Excessively wide coverage will bring more cost burdens to the patients, and thus does not suit the Chinese conditions. In that context, strict screening is highly necessary". Bian Zhenjia told the reporter, TCM will be incorporated as a distinctive Chinese feature. TCM and western medicines will have to strike a balance; all chemical drugs will adopt chemical names (INN); drugs covered will not exceed 400; the list will be publicized upon soliciting public comments broadly.

Operation and Challenges Ahead

According to the requirements by relevant ministries, these drugs with consistent blue label, mini distribution package and ceiling retail price as set by NDRC, will be subject to constant cost reduction through simple packaging and streamlined logistics, and can directly enter the procurement competition. For those pharmaceutical enterprises benefiting from exploring CHS (Community Healthcare Services) and rural market, market prospect is getting brighter upon the disclosure of information on establishing national essential drug list system.

Bian Zhenjia told the reporter that, government will integrate national essential drug list system with network administration of rural drugs, and consult with relevant government authorities as to how to address specific concerns in production, price readjustment, and distribution. Supporting policies will soon be formulated. Looking ahead, the challenges faced by the government in this endeavor are twofold:

Challenge 1: Operation is a key issue for the system. Even with a new national list developed, without changing current cross-subsidy (separation of drug prescribing and dispensing function) and with inadequate policy and financial support to public hospitals, it is almost unavoidable that the bid winners could not supply drugs with sufficient quality or quantity. In a context where hospitals face a large number of drug suppliers but no effective restraint mechanism, successful bid drugs may only be their theoretical choice. As a consequence, emphasis on utilization is a key link for the implementation of essential drug list system.

Challenge 2: it is uncertain whether relevant supporting policies can be appropriately established to provide business incentives for essential drug producers. Similarly incentive may not be aligned for patients to believe that they receive TRUE health/safety benefit and economic incentive of consuming essential drugs. Also, what type of government accountability and governance system can be set up to ensure that “public” essential drugs are produced, distributed and consumed in the “rational way” without generating new kind of waste of public healthcare resources.

International experiences show positive impacts of essential drug policy on public access to drugs and reducing health expenditures. National essential drug system has been recognized by more and more countries as the core of their respective national drug policies.

At present, over 160 countries have established their essential drug list, and 105 countries developed or are drafting national drug policies.

Three general principles largely used by these countries include 1) Sufficient production and supply of drugs; 2) Better availability of drugs; 3) Higher affordability of the general public on drugs. National essential drugs refer to drugs selected among abundant clinical drugs with a scientific approach on the basis of local disease patterns and specific conditions, which can satisfy essential health care needs of most people. Essential drugs have a number of common features, such as good performance, less adverse reactions, steady quality, reasonable price, and convenience for use.

A leading group for national essential drug list was established in 1992, consisting of Ministry of Health, Ministry of Finance, the former State Medicine Administration, the State Traditional Chinese Medicine Administration and health bureau of the PLA logistic department, to brew national guidelines on essential drugs. The first batch of national essential drug list was publicized in 1996, following the principle of "clinically necessary, safe and effective, cost-effective and convenient". In 1998, TCM was introduced for the first time, upon which the list was expanded to cover 740 varieties of 27 types. Since then, new drug list was released every two years in 2000, 2002 and 2004.

In July 2006, the State FDA issued The First Batch Essential Drug List for Urban Communities and Countryside Manufactured by Accredited Pharmaceutical Companies and Criteria for Accredited Drug Manufacturers Targeting Urban Communities and Countryside, making useful exploration in facilitating the establishment of national essential drug list system.

This article is prepared by Vivian Chen using information from government and non-government information sources. Vivian is an expert of healthcare economic policies in China and the Director of Healthcare Economics at RDPAC. The R&D-based Pharmaceutical Association Committee (RDPAC) is a non-profit and non-governmental organization under the China Association of Enterprises with Foreign Investment (CAEFI). RDPAC’s membership is consisted of research-based multinational pharmaceutical companies in China.