Summary of Key Points
Shanghai has suspended the procurement of three traditional Chinese medicine (TCM) products—Jingfang Granules, Yiqing Granules, and Chaihu Injection—from public hospitals due to their failure to adjust prices in accordance with regulations. This is not an isolated incident; it reflects the ongoing efforts to regulate TCM prices nationwide. Measures range from national to local levels, including using price comparison benchmarks, red and yellow label warnings, and suspending product listings to address inflated prices. Additionally, TCM regulation has expanded to cover aspects such as product labeling standards, centralized procurement, and production quality, aiming to shift the industry from being market-driven to value-driven. As a result, leading companies and high-quality products will gain an advantage, while smaller firms will face greater pressure to adapt or exit the market.
Why Were These Three Products Targeted?
The direct reason is their failure to reduce prices as required. However, this issue highlights a common problem in the TCM industry: a fragmented, chaotic, and inefficient pricing system. All three products are widely used, with numerous manufacturers. For example, Chaihu Injection is produced by 75 companies, and both Jingfang Granules and Yiqing Granules by dozens more. The cost differences stem from variations in ingredients (such as the use of Codonopsis or Red Ginseng) and production methods (e.g., granules vs. droplet pills), but there was previously no unified pricing standard, leading to significant price disparities for the same product. For instance, some versions of the same TCM may vary in price by several times or even dozens of times. In Shanghai, the "minimum daily cost" was set as a benchmark, and products that exceeded this limit without a price reduction were directly excluded from procurement.
How Intense Is the National Effort to Curb High Prices?
The regulation of high TCM prices has become a routine practice at all levels:
- National Level: In 2024, the government began to investigate price differences between products with the same generic name, manufacturer, dosage form, and specification across provinces. In 2025, products with price differences of more than 10 times and exceeding 100 yuan were identified as high-risk. In 2026, a national red and yellow label warning system was implemented, with red labels indicating immediate suspension of product listings and yellow labels warning hospitals to take corrective action, along with assessments of their purchasing patterns.
- Local Level: Shanghai suspended the procurement of 28 TCM products last year; Jilin adjusted the prices of 345 TCM products at once, with 51 of them being TCM products. Jiangsu uses a four-level red and yellow warning system, with products with price differences of more than 10 times being immediately suspended. Ningxia included well-known TCM products like Lianhua Qingwen and Angong Niuhuang Wan in the reform list. Guangxi even compares hospital listing prices with those in pharmacies and online, suspending products with price differences exceeding 1.3 times.
In short, any TCM product with unreasonable prices can be banned at any time, regardless of the province.
What Exactly Causes the Inflated Prices in TCM?
The industry has identified four main factors, but the core issue is the excessive "inflation" in prices:
1. Differences in ingredients and production methods that exceed reasonable price ranges: For example, some TCM products using Red Ginseng are significantly more expensive than those using Codonopsis, but the price difference is not solely due to the cost of ingredients.
2. Lack of transparency in quality standards: Some companies claim superior production methods but cannot provide evidence, relying on this to justify higher prices.
3. Excessive discretion in pricing for exclusive products: Many traditional TCM products are produced by small companies, and there was no organized price comparison in the past, allowing manufacturers to set prices arbitrarily.
4. Manipulation in the sales process: High prices often include hidden costs such as advertising, kickbacks, and channel fees. For example, a product with a cost of 10 yuan may be sold for 100 yuan, with 90 yuan going towards marketing.
More importantly, there has been a lack of high-quality clinical data to support the claim that higher-priced TCM products are more effective, allowing for inflated prices.
What Other Regulatory Challenges Does the TCM Industry Face?
Price regulation is just the tip of the iceberg. Additional measures are being implemented:
- Clearer Product Labels: Starting July 1st, product labels must clearly state any contraindications, side effects, and precautions. Previously, consumers were unaware of potential side effects, but now these must be disclosed.
- Accelerated Centralized Procurement: The fourth batch of national TCM product procurement covers 89 products, setting a new record. Centralized procurement is also being extended to traditional Chinese medicine ingredients. Products that do not qualify for procurement will also be subject to price regulation.
- Stricter Production Standards: New regulations require traceability of herbal ingredients and more detailed production standards for formulated granules. For example, the source of the ginseng used must be verifiable.
These policies essentially conduct a "health check" on TCM products, with those that fail to meet the standards (lacking data, standards, or quality) being eliminated.
Will the Industry Change? Who Will Survive?
In the short term, the impact on major products (such as Angong Niuhuang Wan, 86% of whose sales come from pharmacies) is limited. However, in the long term, fewer companies will be able to thrive, as more pharmacies will be required to comply with price regulations. The industry will experience a consolidation, with only the best companies (those with clinical evidence of effectiveness, transparent costs, and unique products) surviving.
In the long run, the following companies will be successful:
- Leading companies with clinical evidence of product effectiveness and transparent costs.
- Classic and well-known TCM formulas.
- Exclusive products with proven therapeutic benefits.
Smaller companies that rely on high prices to cover marketing costs or have ambiguous production methods will struggle to survive.
In summary, the TCM industry is transitioning from unregulated growth to regulated development. This is good news for consumers, as they will have access to more affordable and safe products. For companies, it will be a test of survival, as only those that can provide genuine value and transparency will thrive in the new market environment.