Nearly 10,000 New Facilities To Be Built In China Under Final Health Plan
Full article reprinted from "The Gray Sheet" - April 13, 2009
Find out how under a health care reform plan finalized April 6, the Chinese government will spend $123 billion by 2011 to expand medical services to the entire nation.
The plan calls for building 5,000 township clinics, 2,000 county hospitals and 2,400 community health care centers over the next three years, according to Katherine Wang, counsel at the Shanghai office of the law firm Sidley Austin, who spoke at an April 7 audio conference held by the Medical Technology Learning Institute.
The plan also aims to provide basic medical insurance for 90% of the population, Wang said.
The ambitious program positions the medical device market in China for "huge potential for growth" in the next 10 years, said Chen Yang, a partner at Sidley Austin's Beijing office.
Well over half of the medical devices owned by medical institutions in China date back to the 1980s or earlier, Yang noted. "High-end product is really in high demand."
But breaking into the China market is not easy, she added. Medical device companies face a lengthy and still-evolving product approval process, a complex reimbursement system that varies from province to province, government pricing regulations and favored treatment for Chinese manufacturers.
Device Pricing Could Face Pressure
Currently, most of China's public health resources are consolidated within teaching hospitals in large urban areas such as Shanghai and Beijing. The Basic Medical Insurance for Urban Employees program, created in 1999, covers more than 180 million people, but only 13.6% of China's population.
A major goal of the new health reform plan is to put more health care resources in rural areas, Wang said (1"The Gray Sheet" Oct. 20, 2008, p. 18).
Wang said that with the planned health care expansion, China has become even more concerned with controlling health care spending. One result may be that device pricing will come under increased pressure.
Under the plan, the government will set pricing guidelines for "essential medical treatment" - a term that has not been defined in detail, Wang said. She expects the government will define and substantiate the term in later policy documents.
For treatments not considered essential, hospitals will have more discretion in setting prices, Wang said.
Currently, government-guided medical treatment pricing principles apply to all public hospitals, regardless of their size or location. Under the new plan, however, provincial and municipal governments will have some flexibility in determining pricing for essential medical treatments based on hospital size and doctor qualifications.
The new health reform plan also calls for a device price monitoring system, similar to one currently in place for drugs, that would allow the government to make periodical adjustments to medical treatment charges, Wang said.
In the past, the U.S. device industry has argued that price controls do not adequately take into account the high cost of doing business in a new country (2"The Gray Sheet" Oct. 22, 2007, p. 8).
Wang added that the Chinese government also plans to strengthen regulations on prices of medical consumables and implanted devices in the distribution chain in order to prevent distributors from charging unnecessary or nontransparent pricing mark-ups.
For certain device categories, the Chinese government has initiated a centralized procurement policy. Last year, for example, China's Ministry of Health introduced a centralized procurement process for cardiology devices, such as pacemakers, stents and certain catheters (3"The Gray Sheet" Oct. 6, 2008, p. 12).
National Catalog Details Reimbursement Policies
First published in 1999 and most recently amended in 2007, China's National Catalog for Medical Treatment Charges may designate a device or treatment as non-reimbursable or partially reimbursable.
Devices are deemed non-reimbursable if the government believes they are not clinically necessary or if their therapeutic value is unproven. Examples of non-reimbursable treatments in China include plastic surgery and positron emission tomography scans.
Wang said there is no technology assessment agency that evaluates the effectiveness of new medical devices. The government bases its catalog decisions on expert panels, whose members are not made known to the public at large.
For items deemed reimbursable, device and treatment pricing is determined at the province or municipal level through a local bidding process.
If government regulators find a device is clinically necessary but not fully affordable by local medical insurance funds, it may be classified as partially reimbursable. The same holds true for devices considered to have a potential for over-utilization, Yang added.
Examples of partially reimbursable items include computed tomography, magnetic resonance imaging, pacemakers, stents and artificial joint implants.
The level of payment for partially reimbursable items could influence utilization, especially considering that patients in China must pay hospitals upfront for medical treatment and devices.
Asked whether that policy makes Chinese patients more sensitive to device pricing, Wang answered, "I'm not sure [patients] have a very strong brand- or product-specific preference."
{Editor's note: Additional coverage of Asian markets is provided at 4PharmAsia News, Elsevier's Web site for Asian biotech and pharmaceutical news. 5Sign up now for a no-risk, 30-day trial subscription.]
- Monica Hogan
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