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March 14, 2015

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Concern over plan for drug price ceiling

A GOVERNMENT scheme requiring state-owned hospitals to sell prescription drugs at cost price is likely to result in medical treatments and procedures becoming more expensive, a senior official said yesterday.

The new rule, to be phased in over the next two years, will apply to all public sector hospitals in the city, the Shanghai Health and Family Planning Commission said.

While the scheme would appear to be good news for consumers, the head of one local hospital said that cheaper drugs can mean only one thing: more expensive treatments.

Liu Zhongmin, president of Shanghai East Hospital, a city-level facility in the Pudong New Area, said that as well as increasing service fees, doctors might seek to boost revenue by recommending patients undergo additional procedures.

“To be frank, the loss of (revenue from) medicine sales can’t be covered by a rise in the service fee. So hospitals might have to prescribe more tests to help offset their losses,” he said.

Though neighborhood health centers and some rural branches of major hospitals sell prescription drugs at cost price, most district- and city-level hospitals add a markup of about 15 percent.

Hospitals derive about 40 percent of their revenue from drug sales, Liu said.

“Taking away the profit from drug sales might be seen as a way to cut costs for patients, but that is only part of the problem,” he said.

“But the health service as a whole is in need of reform.”

“What we need is more public sector investment,” Liu said, adding that government funding accounts for just 5 percent of his hospital’s revenue.

Shen Xiaochu, director of the city’s health and family planning commission, said the price ceiling scheme is part of a wider plan to cut the cost of health care for local people.

“We want to reduce the burden on patients by lowering the price of medicines, controlling unreasonable drug use and better regulating the prescription of treatments,” he said.


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