China Cutting Health-Care Costs Threatens Drugmaker Profits

http://www.bloomberg.com/news/2012-03-13/china-cutting-costs-to-expand-health-care-threatens-drugmakers.html

China vowed to extend drug-price cuts, rankling some of the country’s largest manufacturers, in an overhaul of its health-care system to cut the cost of caring for an aging population.

Political leaders, wrapping up their annual National People’s Congress in Beijing today, pledged to make medical care more affordable and widen coverage of state-paid health insurance. The plan will be supported by a tendering system tested in Anhui province that encourages drugmakers to compete on price and quality for state contracts.

While the elderly were looked after in the past by their children, urbanization and the nation’s one-child policy have eroded the tradition of family care, shifting the burden to the state. The government wants to broaden the use of the new procurement method, which led to price reductions of at least 30 percent on medicines on its essential drugs list in the past year, said Sun Zhigang, the top official overseeing the changes.