More Reforms Needed To Raise China Healthcare Quality: AmCham

The China FDA needs to do more to reduce a piling up drug approval backlog, while other issues such as clinical trial reviews, incentives for R&D and pricing in China are all of concern to the pharma industry, the American Chamber of Commerce says in its latest white paper.

HONG KONG – In a wide-ranging but comprehensive look at China’s healthcare wins and woes, the American Business in China White Paper was released on Apr. 21. The main thrust of the report is that the government has enabled the market to play a decisive role in resource allocation, while reform policies have made “significant progress in 2014 to address challenges and promote healthcare.”

That said, the American Chamber of Commerce in China report contains a number of policy recommendations, including reducing burdensome tax rates on private hospitals, dealing with overregulation of pharmaceutical pricing, and unraveling onerous delays in bringing new products to market.

It is the 17th edition of AmCham China’s annual white paper, written by the chamber’s members and based on its annual Business Climate Survey, which was released in February. Within the white paper is a chapter on “Healthcare Services, Medical Devices, and Pharmaceuticals.”

Speaking to PharmAsia News in a phone interview from AmCham’s Beijing headquarters, the executive director of the US-China Healthcare Cooperation Program (HCP), Jun Zhou, said: “Healthcare is such a fundamental element of China’s society, it’s very important for stabilization. The ultimate goal is to meet the needs of the public for high quality healthcare services – but at the moment there is a big gap.

“Part of the focus should be on the limited capacity of the public healthcare system. It is not able to provide better quality care, presently it can only offer basic healthcare needs.”

Clinical Trials

A significant issue for AmCham is the time taken to conduct clinical trials and receive regulatory approval for medical devices, though it applauds the CFDA for developing new rules recognizing trials are only appropriate when “safety and efficacy cannot be demonstrated through literature, test reports, clinical trial reports, or other available evidence.”

It advocates the adoption of a risk-based approach to trials; and revision of the country-of-origin approval requirements, which restrict medical devices from entering the market based on manufacturing location.

Another well-worn issue spotlighted by the report is “drug lag,” which has made life difficult for pharmaceutical companies. Though Chinese officials indicated last year they would streamline drug approvals and reduce needless clinical trials, the report calls on more to be done (Also see "China Drug Approval Backlog Piling Up Fast" - Scrip, 18 Mar, 2015.).

Zhou says that while AmCham has not laid out a timeline, “a lot of people are working on halving waiting times of up to five years, within the next few years.” This could be achieved by recognizing the clinical trials of other countries, sharing academic papers, and starting to think of charging registration fees for medical products, so there are more resources and incentives [See: the AmCham China report]

Private Hospitals Need Tax Breaks

“Another thing we would like the government to do is promote innovative products, and incentivize this,” Zhou adds. “An example, of course, is that some biomedical companies pay lower tax, but this idea could be expanded.”

A solution would appear to be more private healthcare. Yet, in a section titled “Ongoing Regulatory Issues”, the white paper points out that while the government has attempted to improve the taxation environment for private hospitals, there is still a unified corporate tax rate of 25%. This is equal to the highest tax rates for businesses, and such a burden is at odds with the government’s stated aim to attract private capital – both foreign and domestic.

AmCham’s solution is a 15% corporate tax rate. “Private hospitals are very small in number and there is a need to encourage growth and patient flow, as they are competing directly with public hospitals, with all their advantages, such as no tax and funding,” Zhou observes.

“This puts private hospitals in a very weak position. The AmCham proposal intends to level the playing field a little and provide a stimulus, like the government does for high-tech industries and so on. If private hospitals were given an incentive like this then you would see growth and improvement, I’m sure.”

Among the wins for China’s healthcare system, Zhou says, is that the government has published policy initiatives to attract more investment from the private sector. “Another factor is giving doctors permission to practice in different hospitals, which increases competition and efficiency, as good hospitals attract good doctors and lead the way in terms of quality.

“There has also been an increase in coverage for public health insurance, over the last several years, and by last year (2014) this had increased coverage to 95% of the population, which is quite an achievement.”

That said, there is a disconnect between basic medical insurance and commercial medical insurance, in that the latter cannot be used to pay the difference. “This is just not working well for private healthcare, though it’s definitely the way to go.”

Zhou outlines the problems: insurance companies are not able to develop products because there is not enough data to cover the calculations. This kind of data has only been available in recent years, but it’s also hard to access from the relevant government departments, partly due to privacy issues.

“There really aren’t that many medical insurance companies at the moment, though they are a very important part of the equation. 2015 is the last year of the 12th Five-Year Plan and looking ahead, private hospitals and commercial insurance are going to be part of the solution to China’s healthcare problems. There are a lot of challenges here.”

Price Cuts Cause Quality Concern

On the subject of updating the National Reimbursement Drug List (NRDL) to ease the financial burden on patients using innovative, higher-quality drugs, AmCham is pushing for action. The NRDL was last updated in 2009, while some oncology medication has been waiting for a listing since 2004.

Asked when this was likely, Zhou replies: “Seriously, I don’t know. It’s the million-dollar question.”

As for pricing, AmCham called last year “historic for drug pricing reform,” as the government took steps to liberalize price controls and the National Development and Reform Commission issued draft regulations on drug pricing reform (Also see "Rising China Payer Agency Screaming For Drug Cost Control" - Scrip, 10 Mar, 2015.).

However, Zhou has a word of warning: “I’m a little concerned about freeing up the pricing. In all countries the governments want to control costs, or rather the growth of costs, but all the focus seems to be on cheaper prices.”

“We don’t know who is going to decide the quality of products. The current situation is that we can’t see incentives to improve quality, and I can’t see this changing. I can’t see how it can change. I’m a little afraid that the situation might be deteriorating.”

He concludes on a positive note, however, saying China’s healthcare industry holds considerable and offers many opportunities, such as senior care, healthcare IT and mobile health. “There is also the fundamental question of who will pay for that, whether this is the government, domestic or foreign investors, or a mix, whether it’s out of pocket or insurance.”

“We do hope the economic reforms will stay on track, it’s all about improving healthcare and improving quality.”