Drug cartels

An unintended consequence: medicine shortages

Drug cartels

Drugs bust: stocks of essential medicines are running low in some cities

Aside from announcing a major increase in spending, the other concrete measure introduced at the onset of the healthcare reforms was the creation of a ‘national essential drugs list’ in August 2009.

This provided for a set of common medicines that should be available at all times at an affordable price so as not to fleece patients’ pockets.

The idea was that the government would use its centralised purchasing clout to drive down the cost of these drugs – and thereby the eventual cost of drug purchases to the average consumer. China has at least 4,000 factories producing pharmaceutical products, and so a competitive tendering process was planned to bid down the price at which they were sold to hospitals.

The procurement plan worked so well that it has backfired. The National Business Daily reports that the more disciplined approach has actually led to shortages of key drugs, as manufacturers have decided that margins are now often so low that it’s not worth staying in production. It cites the specific example of protamine, a drug that is required in heart surgery. Only four pharma firms are now registered with the State Food and Drug Administration as approved manufacturers of protamine and even they have cut back on production. The newspaper says the situation is so serious that hospitals in Hubei, Jiangsu, Shandong and Beijing all face shortages. Some have suspended non-emergency heart operations.

Fingers are now being pointed: a Health Ministry spokesman told media last month that drugs being out of stock is the responsibility of the State Food and Drug Administration. But the ultimate responsibility lies with the government – since it has been responsible for cajoling prices down to levels that manufacturers say are no longer economic.

Hence National Business Daily quotes an executive from a major Shanghai-based pharma firm as saying the profit is far too thin on protamine. The tendering process has been “a magic weapon”, he complains, forcing a drastic price reduction with each new round of bidding even as labour and raw material costs continued to rise. The firm has now abandoned making many of the older drugs on the government’s list in favour of new and more expensive alternatives.

The problem is widespread. A survey of 42 major hospitals in 12 cities found shortages of 342 drugs, says Global Business and Finance. These were all ‘cheap’ drugs: 211 of them sold for less than Rmb30 per dose, and 130 were priced at less than Rmb10.

After two years in operation the scheme’s goal of making much-needed drugs both cheap and plentiful has proven elusive. In a measure of how complex the reform process is proving, an ‘essential’ drugs list is fast becoming an ‘unavailable’ one.

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