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LSE Health outlines reforms for China's pharmaceutical system

tabletsChina’s pharmaceutical system will struggle to cope with the twin challenges of a rapidly aging population and increases in non-communicable diseases, such as diabetes and heart and lung disease. 

This is one of the findings from a report published today [Thursday 7 July] by LSE Health and the State Council of China. Recognising the importance of a strong domestic pharmaceutical industry in order to meet China’s growing healthcare needs, the authors identify the country’s main challenges and propose a series of policy measures to help build a robust system that provides affordable and effective medicines to all[1].

The report identifies market fragmentation as one of the major challenges in China’s pharmaceutical system. Currently, there are close to 5,000 different drug manufacturers operating in China. With the top five manufacturers holding less than 15 per cent of the market share, a far smaller percentage than in developed countries, many of these companies are not capable of abiding by Good Manufacturing Practices that are essential to drug quality and safety, the researchers suggest.

Efforts to increase market concentration are further obstructed by regional political interests, with firms facing constraints on recruitment and subject to variable local taxation. Additionally, China’s primary pharmaceutical regulator does not have capacity to provide effective oversight to the fragmented marketplace.

The report also finds that China's innovative sector is relatively weak. Research and development accounts for only around two per cent of sales, compared to 14 to 18 per cent for multinational pharmaceutical companies.

To address these issues, the authors call for a comprehensive industrial policy framework to increase quality in generic medicines and foster innovation within the pharmaceutical industry. The policy would also take into account other important factors, such as intellectual property rights and the approval processes and pricing of new drugs.

Professor Elias Mossialos, Director of LSE Health, said: “China will soon be the world’s second largest pharmaceutical market by value, behind only the United States, so a strong domestic pharmaceutical industry is crucial if its growing healthcare needs are to be met. If it is to ensure that all Chinese citizens can access safe, effective and high-quality medications, the government must develop a comprehensive industrial policy framework that prioritises both an increased quality in generic medicines as well as fostering an innovative industry to develop new medicines.”

Professor Chen Wen, Dean of the School of Public Health at Fudan University, who reviewed the report, said: “This report is the most comprehensive analysis of the Chinese pharmaceutical market and policies yet. Highly recommended to policymakers, analysts and students of health policy.”

Download a copy of Pharmaceutical policy in China: Challenges and opportunities for reform here

For more information

Contact:

Beth Kreling, LSE Health, B.Kreling@lse.ac.uk  

Jess Winterstein, LSE Press Office, 020 7107 5025, j.winterstein@lse.ac.uk

Notes to editors

[1] The report identifies 11 key areas for improvement and provides specific policy recommendations for reform: overall regulatory environment; drug approvals, drug quality and drug distribution; key health issues; affordability and access; pricing and reimbursement; prescribing; hospitals; primary care; pharmacies; Traditional Chinese Medicine; and industrial policy.

Pharmaceutical policy in China: Challenges and opportunities for reform is published by LSE Health and the Development Research Center of the State Council of China.

The report’s authors are:

  • Elias Mossialos, Brian Abel-Smith Professor of Health Policy, LSE and Professor of Health Policy and Management, Institute of Global Health Innovation, Imperial College London.
  • Yanfeng Ge, Director-General and Senior Research Fellow, Department of Social Development at the Development Research Center of the State Council in China.
  • Jia Hu, Research Associate in Health Policy, LSE Health.
  • Liejun Wang, Deputy Director-General and Senior Research Fellow, Department of Social Development at the Development Research Center of the State Council in China.

China will soon be the world's second largest pharmaceutical market by value behind the United States. Spending on drugs was over 1,186 billion RMB in 2012, representing close to 40% of all healthcare spending. Growth in China’s drug expenditures has grown by an average 14.1% a year between 2005 and 2012.

7 July 2016

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