Healthcare for all by 2020: China looks to healthcare companies for a healthier nation

The Chinese authorities want to loosen the rules on the testing of foreign pharmaceuticals so they can be given to Chinese patients faster. This is part of an ambitious plan to expand and improve healthcare services.  


China aims to make basic healthcare services accessible to every citizen by 2020 as part of its Healthy China initiative. This could prove big news for foreign drug manufacturers.

The “Healthy China 2030” plan to establish a basic medical care system covering both rural and urban residents was launched in October last year. This marks remarkable progress in Chinese healthcare system reform.

Drug manufacturers are currently required to conduct local clinical tests, even for drugs that were approved overseas. This means it can take five years for the foreign pharmaceutical companies to launch a new drug into the Chinese market, despite it being the second-largest in the world. This compares to about 16 months in the United States.

Testing procedures for foreign drugs will be simplified

The China Food and Drug Administration (CFDA) had proposed eliminating these local trial requirements. This will align standards between international labs and Chinese regulators. The CFDA’s draft rules for imported drugs registration are currently open for comments from the public.

Imported drugs would be allowed to apply directly for market authorisation once they completed international multi-centre clinical trials, the document said. Further, foreign manufacturers would not have to undertake country-specific clinical trials in China. Instead, China would just need to be one of the countries in which patient trials are conducted. This will save foreign companies years in time and millions in development costs.

“Multinational drug companies will now have more motivation to carry out clinical trials in China, where there are plenty of eligible people for testing and costs are lower,” said Zhao Bing, director and health care industry analyst at UBS Securities. “But at the end of the day, each company has to balance the upfront cost of new drug discoveries and development against potential sales income.”

This was because although the Chinese market was huge it may take some time for doctors and patients to use new formulations, he explained.

The changes would make drugs cheaper, cutting the amount of money hospitals make

Overall, this is good news for Chinese patients. People will be able to access innovative drugs much earlier because pharmaceutical firms will be able to get them onto the market quicker. Access to the huge Asian market should increase the company’s sales volumes, and this should make the drugs cheaper to buy.

Wang He Sheng, the deputy director of the National Health and Family Planning Commission has publicly outlined the new plans. One of the major changes is the full implementation of the zero mark-up policy.

This will prevent public hospitals from putting an additional 15% margin onto drug sales. The ban was successfully piloted in 2011 at grassroots healthcare facilities, before being expanded to county level hospitals in 2015. Last year a trial was run in 200 hospitals.

The National Bureau of Statistics said China’s total healthcare spending exceeded 4 trillion yuan in 2015. This figure will reach between US$155 billion and US$185 billion a year by 2018, say estimates. Wang estimated that scrapping the extra costs on drugs would bring down expenses.

Bills would fall but the money would still need to be found

“This year, it is expected to reduce medical bills for Chinese people by US$8.7 billion to US$10 billion,” he said. “But it is very difficult as it involves medical treatment, medical insurance and medicine. It is a reform from the very deep in the system,” Wang added.

George Baeder, an independent drug industry adviser, noted this policy may still prove ineffective as it is not clear how it will be paid for. “The logical answer is that it has to come from local revenue — most likely property taxes,” he said.

Without a clear idea of where the money to fund the programme was coming from policymakers were, “squeezing the balloon in one place only to have it pop up and explode in another.” Hospitals may respond to the cuts by increasing fees for users, he said. Local governments were unlikely to have the funds to fill the payment gap.

Cover for people with critical illnesses will be increased

Insurance cover for people with critical illnesses is also being expanded. Critical illness coverage was first introduced in 2012 and is now fully implemented, with a national average reimbursement rate of 70%. In 2016, it covered one billion people.

“This year, we need to expand our work in critical illness insurance, especially in poverty-stricken areas,” explained Li Bin, director of the National Health and Family Planning Commission.

Patients whose treatment cannot be completely dealt with under basic medical insurance, such as those suffering from cancer or other chronic conditions, will be able to get innovative drugs. These will mostly be manufactured by multinational pharmaceutical companies.

Future challenges mean reform is vital

China’s healthcare system has already undergone one great revolution. At the start of the 21st century, less than 1/3 of the population had access to healthcare insurance. Today that figure is close to 100%. This is impressive but necessary progress.

Infectious diseases pose a serious challenge for authorities to manage and have replaced non-communicable diseases as China’s biggest health concern. Meanwhile, the country’s ageing population is growing and so are their needs. Easy access to new drugs will go part of the way to fixing China’s healthcare gaps, but there is no easy cure.