Summary of Key Points
The 12th round of drug procurement focused on stabilizing clinical practice, ensuring product quality, combating excessive competition, and preventing unfair bidding practices. The main measures included reporting drug volumes by brand, reviving the inclusion of original research drugs (OIR), and adjusting the distribution quota system to stabilize the medication landscape in hospitals. Additionally, a dual-tier pricing mechanism was implemented to curb malicious price competition. The outcomes were as follows:
- Doctors gained more autonomy in choosing medications, reducing the risk for patients when changing their prescriptions.
- OIR drugs found a way back into hospital supply, leading to more stable market prices and clearer expectations for companies.
1. **Stabilizing Clinical Practice**: Preventing Hospitals and Patients from Suddenly Using Unfamiliar Drugs
In previous rounds of procurement, volumes were reported based on generic names (e.g., all antihypertensive drugs without specifying brands). This could result in hospitals receiving drugs they had never used before, which could cause issues for patients. The new approach aims to address this:
- Reporting by Brand: Hospitals can now specify the brand of drugs they wish to purchase (e.g., “Bayer’s antihypertensive drug”). This practice was piloted in the 11th round and continued in the 12th, with 77% of volume reports specifying a particular brand.
- Revival of OIR Drugs: OIR drugs (imported or high-quality reference products) could re-enter the procurement list if their prices were reduced to within three times the reference price. Even if they did not win a quota, they could still be available in hospitals, meeting the needs of patients who prefer these drugs.
- Hospital-Determined Distribution Quotas: In the past, low-priced drugs often secured a larger share of the market. Now, extremely low-priced drugs, even if selected, do not receive a guaranteed quota. The remaining 50% of the quota is allocated by hospitals based on clinical effectiveness, quality, and timely delivery, giving advantage to large pharmaceutical companies with established products.
These changes ensure that patients do not have to switch to unfamiliar drugs abruptly, and doctors can continue using medications they are familiar with, leading to more consistent treatment.
2. **Combating Excessive Competition**: Preventing Companies from Losing Money on Low Prices
Some companies previously offered extremely low prices (e.g., selling a drug for 1 yuan when the cost was 10 yuan), which often led to supply disruptions or quality issues. The new mechanism includes two tiers to regulate low prices:
- First Tier: Price Anchoring: The higher of the “mean of the bids from qualifying companies minus one standard deviation” and the “lowest bid” is used as a price benchmark. Prices below this threshold are considered unreasonable and do not disrupt the market.
- Second Tier: No Quotas for Extremely Low Prices: Bids that are more than two standard deviations below the average will not be granted a quota, and companies must provide a rationale for their low prices to be included in the procurement.
This approach prevents companies from arbitrarily setting low prices, ensuring that price reductions are justified and do not compromise quality or supply.
3. OIR Drug Companies: Moving from Resistance to Active Participation
Previously, OIR drugs were expensive and rarely selected for procurement, forcing companies to withdraw from hospital markets. The new policy has compelled them to participate:
- Revival Mechanism: By reducing prices to within three times the reference price, these drugs can still be included in the list, albeit without a guaranteed quota.
- 2026 Deadline for Market Access: Starting in 2026, hospitals will be required to spend no more than 25% of their drug purchases on non-procurement drugs. OIR drugs that do not qualify will face significant market pressure.
As a result, 10 OIR drugs were successfully included in the procurement list, the highest number since the initiative began.
4. Benefits for Hospitals and Patients:
- Hospitals: Doctors can choose familiar drugs with proven clinical efficacy, reducing the need to switch to unfamiliar medications.
- Patients: There is a reduced risk of changing medications, especially for chronic patients, which improves treatment compliance and reduces the likelihood of interruptions in treatment.
- OIR Drug Users: OIR drugs remain available in hospitals, eliminating the need for patients to seek them elsewhere.
5. Stabilizing the Drug Market: More Predictable Prices and Increased Corporate Confidence
In the past, large price fluctuations in procurement rounds made it difficult for companies to set prices strategically. The new approach makes price reductions more predictable:
- Companies no longer rely on low prices to gain market share but compete based on quality and supply capabilities.
- With more stable market expectations, companies are more inclined to invest in research and development and ensure product availability, which is beneficial for long-term drug quality and innovation.
In summary, the 12th round of drug procurement marks a shift from aggressive price cuts to a focus on maintaining quality and clinical effectiveness, representing a more sustainable approach for patients, hospitals, and pharmaceutical companies.