The bad side-effects of China’s campaign to cut drug costs

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Blood-pressure medication with little effect. These are some of the problems that doctors have encountered in China’s public hospitals. They have been speaking out in recent weeks, questioning the quality of the country’s drugs and urging reform of the government’s procurement programme.

The public has chimed in, too. “Medicine that doesn’t work, no matter how cheap, is useless," wrote one user of Weibo, a social-media platform. The government set up the procurement scheme in 2018 with the goal of lowering costs.

Public hospitals had been negotiating individually with drug-makers; now there would be a central bidding system run by the National Health-Care Security Administration (NHSA). Because it was offering higher-volume contracts, the state insisted on better deals. (Public health-care institutions account for about 70% of drug sales in China.) It was hoped that foreign firms would compete with domestic drug manufacturers, driving down prices.

At the same time, the space for kickbacks to doctors and hospitals would narrow. The plan worked in one important regard. To secure contracts, drug-makers have cut prices by as much as 95%.

All but a small fraction of the drugs procured through the programme are generics made by Chinese firms, which have undercut their foreign counterparts. The government says that since 2018 the scheme has saved China’s medical-insurance fund about 440bn yuan ($61bn)—much-needed relief for a health-care system that must cope with an ageing population. The NHSA claims that 80% of those savings have been used to buy innovative drugs.