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Hospitals began to use hem?and then to overuse them?both to treat illness and to reduce operating deficits resulting from underpinned medical services and the loss of government subsidies in the asses. The higher prices and markups on imported and branded drugs helped hospitals to balance revenue shortfalls, a practice that persisted and eventually led to financial dependency. In 2007, hospitals showed a negative balance on medical services of ARM 1 08 billion and a positive balance from drug sales of ARM 17 billion. The surplus from drug sales is equivalent to 39 percent of their net subsidy from the government. Without pharmaceutical revenues, in other words, hospitals would operate at an overall loss.

China has emerged as an important player in the global pharmaceutical market. By 2004, China had become the ninth largest pharmaceutical market in world. Pharmaceutical sales grew at an annual rate of 28 percent during the mid-asses, much faster than in the rest of the world (9 percent). The value of pharmaceutical imports was 350 times higher in 2007 than in 1978, and the value of exports was 86 times higher during the same period. China’s domestic pharmaceutical mind estrus has grown substantially. In 2007, the gross alee of China’s pharmaceutical industry reached ARM 600 billion. The industry share of GAP rose from 2. 17 percent in 1978 to 2. 71 percent in 2007.

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AIMS reports (2006) indicate that domestic manufactures dominate the market, accounting for 70. 3 percent in sales value. China has become a major overseas market for many multinational pharmaceutical corporations. Sales growth in China of these companies was much higher than the global rate. For example, the growth rate of Assistances was 25 percent for the China market and China Health Policy Notes, No. 1 7 percent for the global market. The AIMS reports (2006) showed that 29. Percent of the sale values in China were joint venture and import products. The share could be as high as 40-46 percent in large cities such as Beijing and Shanghai. Pharmaceutical expenditures reached ARM 448. 6 billion in 2006.

It accounted for more than 40 percent of total health expenditure, which is about 10 percentage point lower than it was in the 1 9905, but still substantially higher than many countries in the world. The high pharmaceutical expenditure is associated with both high retail prices of drugs and high utilization, some of which is irrational use of drugs. Furthermore, both price and utilization actors are deeply associated with policies including overall health sector regulation, health care financing policies, and pricing policies. Essential medicines The notion of essential medicine and an essential drug list was first advanced in the midi sass by the World Health Organization (WHO). The idea was to identify the hesitation generic drugs and make them affordable and universally accessible on a global scale.

In 1 992, China started to formulate an essential drug list combined with the launch of urban medical insurance reforms. The essential drug list served as the basis for the urban medical insurance drug reimbursement list. Although the list remained in place and has been revised every two years since 1 996, essential medicines have had a limited impact in China for several reasons. First, prices imposed by government authorities were often based more on social ideals than on the economic realities of a competitive pharmaceutical market. As a result, unrealistically low prices left manufacturers with little incentive to produce essential medicines.

Second, most essential medicines are generic medicines intended for use at the lowest possible cost; so even when local hermetically manufacturers have produced them, hospital providers have not necessarily been eager to prescribe them, because they rely on drug sales (primarily brand drugs) to supplement their physicians’ incomes. Third, until fairly recently clinical guidelines were not available on the utilization and medical management of essential drugs. Physicians are ?educated” about new drugs primarily by manufacturers’ representatives. The widespread perception that generic drugs are not safer effective, or reliable compared to brand drugs has been reinforced by several extremely well-publicized failures n quality control. Although there is only limited evidence available, the availability of drugs on the list appeared to be very low and the prices appeared to be high.

One WHO/HAW evaluative survey in Shanghai (mid-asses) found procurement prices of essential medicines to be 7. 6 to 9. 9 times higher than the international reference price for brand drugs, and about 1. 4 times higher than the international reference price for the lowest-priced generics. The availability of essential medicines was estimated at beјen 13. 3 percent and 33. 3 percent in public hospitals and between 10 percent and 15 percent in harmless, with the generic drugs being more accessible than the innovator brand drug. Similar results for prices were found in The Financing, Pricing and Utilization of Pharmaceuticals in China: The Road to Reform Sandhog and availability was even lower.

In addition, the Shanghai study indicated that the cost of some essential medicines may potentially pose financial burden for patients, especially those with chronic conditions. The government has started another wave of reform to reinvigorate the National Essential Medicine System and this has high priority on the political agenda. The new wave of reform focuses on every aspect of the system, including production, pricing, distribution, procurement, payment, and use. There are still debates about the roles of government and market, whether it is appropriate to require exclusive use of essential medicines in primary facilities, and how to evaluate the use of essential medicines in other facilities.

Managing the costs of pharmaceuticals In both absolute and relative terms, the cost of pharmaceuticals is extremely high in China, with pharmaceutical expenditure accounting for 41 percent of verbal healthcare cost For most of COED countries, by contrast, this share is in the range of 15 to 25 percent. Price controls Price control strategies have evolved through several stages. During the planned economy prior to 1 978, the government set all prices. In the early stages of China’s economic transition in the early asses, drug prices were left largely to the market. However, when drug prices rose at nearly 1 0 percent a year, both the central government and local administrations stepped back in to control prices.

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