Posted on Feb 03, 2016 by Travis Jones
At the beginning of this year, it was revealed that at least one hospital in China (the Jiangsu Province Hospital, in the east of the country) was experiencing a shortage of common pharmaceuticals. The reason for this shortage was cost, as the hospital had asked drug makers to pay a large deposit up front for the privilege of selling drugs within that hospital. Drug makers who didn’t want to pay the deposit –around 8 percent of the drug’s anticipated annual hospital sales (up to US$45,600 per product) – saw their product banned.
Eventually, thanks to media attention and patient complaints, Jiangsu Province Hospital lifted its ban and agreed to accept drugs without the deposit. Still, many patients were left wondering; will drug shortages be a mainstay at this or other Chinese hospitals in the future? And why had the deposit controversy and drug ban occurred in the first place?
What seems to be the problem?
According to the Jiangsu Province Hospital, drug makers were charged a deposit to protect the hospital – both financially and in terms of health care. If a quality issue were to arise, or if the drug maker raised prices unexpectedly, or if there were a drug shortage because of delivery delays, the hospital would use that up-front deposit to continue supplying patients with their medicine. Jiangsu Province Hospital and other Chinese hospitals have referred to their deposit policies as “active innovation,” and similar policies are being implemented in four provinces – Jiangsu, Fujian, Anhui and Qinghai – with the notion that implementation across the entire country might not be far behind.
Health care experts say that although hospitals have a right and a need to protect themselves financially, the major force behind drug deposits is simply that hospitals in China are losing money thanks to anti-corruption policies coming from Beijing. Following the rise of drug scandals starting in 2013 – in which giants like GlaxoSmithKline were found guilty of bribing hospitals and doctors in a scheme to raise drug prices – hospitals were prohibited from charging patients a mark-up on drugs, usually around 15 percent. While eradicating mark-ups has undoubtedly lessened problems like artificial price inflation, over prescription and bribery, hospitals have been left facing financial strain.
While drug deposits can help alleviate some of that financial strain, they have also led to major international drug companies, such as Eli Lilly, Pfizer, Bayer and others, pulling out of Jiangsu Province Hospital; saving the drug makers from losing money on pricey deposits, but leaving patients without access to a significant range of medication.
Testing patients' patience
Although Jiangsu Province Hospital has since reversed its policy and is no longer charging drug makers the up-front deposit. Still, patients across China are concerned that as long as public hospitals face financial strain (and there is evidence that this will increase more in the future, with chronic lifestyle disease rising alongside the middle class and doctors’ salaries in many parts of China), they may face drug shortages in the future.
Patients who are worried about drug shortages may want to choose private rather than public health care. Although 80 percent of hospitals in China belong to the public system, there is a strong network of private care facilities offering medical services up to international standards and doctors that speak a number of languages. These private facilities make their own arrangements with drug makers and are not facing the same financial strain as public hospitals, so drug shortages are not a concern. Anyone wishing to take advantage of this private care system will need a good insurance policy in place, whether provided as part of an employment package or purchased individually.
An international insurance policy can also protect patients by helping them find other sources of medication, in case their preferred public hospital doesn’t have the drug they want. Some visitors or expatriate residents choose to receive care in the international wing of a public hospital (as these tend to be more modern and offer a wider choice of doctors who speak a number of international languages), so the option of going elsewhere for medication in case of a shortage is an important one to have. Of course, protection against drug shortages is but one of many reasons that expats in China choose to purchase their own international insurance policy.
Anyone interested in finding out more about international health insurance in China and how it can offer protection from potential drug shortages should chat with one of the experienced insurance professionals at Pacific Prime China to learn more about the health plan options available. Not only can they provide you with plan comparisons from major insurers and free price quotations, they will also be glad to answer any other questions about insurance or health care in China that you may have. Contact them today!