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Frost & Sullivan Looks at the Influence of China's New Health Reform on the Pharmaceutical Market
Date:5/21/2009

SHANGHAI, May 21 /PRNewswire/ -- Policies of the new health reform in China have been released after deep consideration and discussion, among which is one of the most important policies 'The National Essential Drug System'. The purpose of this policy is to solve the high cost of drugs in China through a government-initiated program. Ideally the program will lower the drug prices that cover a wide range of diseases and meet the majority's basic medical needs.

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In essence, the policy states that the provincial government organizes the public bidding to choose the drug suppliers and distributors. The reference price is set by the central government and finalized by the provincial government according to the bidding result. National essential drugs should be available in all healthcare institutes and drug retailers but not necessarily 100% used, where the usage rate will be further ruled by the healthcare administration.

According to Kitty Lu, Consulting Manager of Pharmaceuticals practice, Frost & Sullivan China, the healthcare reform will accelerate the centralization of the generic pharmaceutical market.

For generics, being listed as a national essential drug incurs the paradox of a lower price and higher sales. The price is expected to decrease by 20%-25%, while the increase of sales is dependent on the execution of this policy, which Frost & Sullivan is optimistic about as it is one of the most important parts of this new health reform.

Under this assumption, generics with small sales if included in the essential drug list will have a little space to increase but will definitely decrease if not on the list, causing a dilemma for small generic suppliers. It is expected that 1/3 of the small generic suppliers who lack efficient di
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