Legal & Regulatory > China > Regulatory Reforms

The key facts about regulatory reforms in Chinese pharma. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 99.

1. Are there proposals for reform or significant change to the healthcare system?

Reform of Medical Insurance Payments

To improve the cost-effectiveness of the current healthcare system, pilot policies of Diagnosis-Related Groups (“DRG”) payments have been implemented in 30 cities across the nation. All of them have passed the pre-assessment and entered the trial implementation phase. Pilot policies of Big Data Diagnosis-Intervention Packet (“DIP”) payments are to be implemented in 71 cities.

The DRG payment system is a payment management model under which patients will be assigned to different groups based on their disease diagnosis, and medical reimbursement will be calculated and paid according to the group standard.

The DIP payment system is a payment management model using big data to fine-tune the categorization of diagnosis and treatment pathways already established in the DRG system.

“One-Invoice” Policy

The “one-invoice” policy in the drug distribution has taken place on a trial and non-compulsory basis in a few regions in China. While the “two-invoice” policy which was initially launched nationwide in 2016 requires that the issuing of the drug manufacturer’s invoice to the distributor be directly followed by the distributor’s invoice to the end customer (i.e. the public hospitals), the “one-invoice” policy takes a step further by encouraging the drug manufacturer directly issue invoice to the end customer, aiming to increase the transparency in drug prices and eliminate excessive profit margins associated with multi-tiered distribution models.

To name a few local practices of the “one-invoice” policy:

• The government of Gaotai county, Gansu province issued the “Key Points of Implementation of Health Insurance Policies in 2021”, pointing out that it is necessary to continue improving the system of bidding and procurement of drugs and medical consumables, optimize the classification of drugs and medical consumables in procurement activities, gradually liberalize the delivery market, incentivize and support direct delivery by manufacturers or third parties designated by manufacturers, and promote delivery under the “one-invoice” policy, in order to reduce the prices of drugs and provide high-value medical products.
• The health committee of Pingdingshan, Henan province, issued the Notice on Further Strengthening the Management of the Distribution of Drugs and Consumables in Public Medical Institutions, stating that public medical institutions shall play a primary role in the market of drugs (or consumables) procurement and, subject to the principles of openness, fairness and impartiality, select those suppliers which can carry out the “one-invoice” policy and supply drugs and consumables directly to medical institutions in the city.
• The authority of Anhui province has also released a commentary, stating that reform is a process of breaking the inherent profit distribution pattern, mirroring the changes to drugs and consumables procurement. In terms of securing product supply, the authority has indicated that prices are reduced as far as possible but without compromising the quality. The winning bidder of any drug procurement contact must have the prime responsibility for quality and supply. Anyone in this market must move towards issuing one, rather than two, invoices, with the aim of reducing the costs of distribution. The winning bidder will either deliver the procured products or engage a third party with the required capability and good credit.
• The health insurance bureau of Quanzhou, Fujian province, is encouraging the use of one invoices when it comes to high-value medical consumables as well as ensuring better record keeping, stamping out dishonesty and taking greater control of contract performance. The bureau is also working towards synchronizing healthcare, healthcare insurance with the goal of optimizing the prices of medical services and putting in place measures that support the delivery of healthcare.

2. When are they likely to come into force?

Some of the reforms proposed by the Innovation Opinion have already come into force, for example:

• The establishment of a filing system for the clinical trial site (previously, all sites must go through a stringent approval process to host clinical trials).
• The establishment of a filing system for clinical trial application replacing the previous approval system. NMPA has 60 business days to conduct its review for new drug clinical trial applications, and then the application will be deemed approved if no objection or question is raised.
• Clinical data generated in foreign trials can be used to support a marketing authorization application in China.

Some of the proposed reforms are still pending and will be enforced when related implementing rules are promulgated, including the patent linkage and regulatory data protection system and the expansion of the MAH system.