In a bid to tackle pharmaceutical companies’ “price discrimination,” Chinese officials are introducing caps on price differences for identical drugs in different parts of the country.

In China, provincial authorities have control over most drug procurement procedures. This has led to differences in drug prices across provinces, which, in theory, should promote greater access to drugs and pharmaceutical innovation.

However, studies have shown that some poorer provinces have paid higher prices for identical drugs than high-income provinces.

In response, the National Healthcare Security Administration (NHSA), which oversees drug procurement in China, released a notice in late December stipulating that a pharmaceutical company’s tender price for a drug will be capped at 1.5 times the “bid price” — the final price at which a drug is procured — of the company’s same drug sold elsewhere or the highest “bid price” of an identical drug sold by another company, whichever is higher. 

During the implementation of the new rules, pharmaceutical companies will not be allowed to withdraw their tender bids in provinces where they have listed prices higher than the benchmarks.

A new unified drug procurement information platform will also be launched to promote further information sharing between provinces. Since 2015, public hospitals have been procuring drugs through purchasing platforms managed by their provincial authorities, which do not necessarily indicate prices in other parts of the country.

Drug prices in China can vary widely from province to province. For example, 5ml of the cancer drug Paclitaxel is priced at 67 yuan ($9.4) in the southwestern Sichuan province and 137 yuan in the central Hubei province, according to a review by Sixth Tone of the two official provincial procurement websites.

Some provinces, such as Sichuan and Hunan, have already begun imposing caps on procurement prices based on prices elsewhere.

According to the NHSA, “abnormally” high price differences will be “eliminated” by the end of March. While recognizing that “small” fluctuations in price are to be expected due to factors such as varying market sizes and transportation distances, these differences should not be “abnormally” high, the head of the NHSA drug procurement department said.

“From a patient’s perspective, price regulation can enable them to obtain essential medication at a fairer and cheaper price, and reduce unfair premiums caused by … vicious market competition,” Lu Yun, head of the pharmaceutical price research center at China Pharmaceutical University, recently wrote.

For years, Chinese officials have sought to balance competing needs to lower drug prices while encouraging pharmaceutical innovation and ensuring steady supply. While procurement prices for drugs have declined since 2010, this reduction has also been blamed for causing drug supply shortages and disruptions.

The NHSA official said that provincial authorities should refer to a drug’s “transaction price” rather than its lowest price nationwide when determining whether it is being fairly priced in their province, without specifying how to determine this benchmark.

“This approach helps maintain a balance in prices between regions and corrects local discrepancies without causing large price reductions,” the official said.

Editor: Vincent Chow.

(Header image: VCG)