China to stop setting most medicine prices from June 1

BEIJING/SHANGHAI - China will remove price caps for most medicines from June 1 and give the market a larger role in setting prices in the world's second largest pharmaceutical market, the country's economic planning agency said on Tuesday.

The change would encourage "reasonable" pricing of medicines and help control costs in the country's state medical insurance schemes, the National Development and Reform Commission (NDRC) said in an online statement .

"We have decided from June 1 to cancel government-set prices on most drugs to improve purchasing mechanisms for drugs, control costs for medical insurance and allow the trade price of medicines to be set by market competition," it said.

China is a magnet for drugmakers, medical device firms and hospital operators with spending on medicines set to hit as much as $185 billion (S$247 billion) by 2018, according to IMS Health.

Beijing has also been stepping back from caps on consumer drug prices but faces a tough task to ensure steady supplies of vital medicines at the same time as keeping prices low.

Analysts say the impact of the NDRC's move will be muffled because around three-quarters of drugs in China are sold through hospitals rather than through retail channels, where a separate tender process helps keep prices down.

The new move will affect all drugs apart from anesthetics and grade one psychiatric medications, the NDRC statement said.

China removed price caps on a limited number of drugs in April last year after criticism that its controls had caused shortages of a number of critical drugs used by millions of patients to treat hyperthyroidism and other ailments.

President Xi Jinping has made a priority of providing affordable, accessible healthcare in a country struggling with rising healthcare costs, long waits for care and lapses in medicine safety.