SHANGHAI - China's Ministry Of Health released Aug. 18 the first part of the essential drug list for community health organizations, which consists of 205 chemical drugs and biologics as well as 102 traditional Chinese Medicines. The implementation will begin Sept. 21 in 30 percent of the government-run low-tier hospitals and clinics.

The second part of the EDL, which covers large and mid-sized hospitals, will be released soon as an expansion of the first part, according to MOH.

Essential drugs will be purchased by the provincial government through an open online bidding system and distributed to health organizations by designated distributors, MOH said. No mark up will be added on to the essential drugs sold in these organizations.

"It's certainly long awaited and quick to be implemented," Helen Chen, Shanghai-based L.E.K. Consulting Director, told PharmAsia News.

"MOH certainly made an effort to include a wide variety of treatment areas in this short list. It seems that the Western (chemical and biologic) drug list has been further cut, to number less than 200, rather than the 300 that were [earlier] mentioned," Chen pointed out.

"There are whole categories, such as all the mandated vaccines and government provided HIV treatments, which are counted as one, so that might bring the list up," she said. "There are also 100 Chinese medicine-derived drugs on the list, so perhaps that would have been counted as Western drugs by some."

Most of drugs listed are the most basic generic products with many providers in China and covering most common diseases.

"Since there are routinely tens if not hundreds of manufacturers producing the same generic product, the expected price cut, either government-mandated or through competitive bidding, may well not be compensated by increased sales volume," said Hong Kong- based Morgan Stanley analysts in an Aug. 18 report.

Unlike the chemical products suffering from price cuts in the near term, unique TCM products will benefit from listing in the EDL, the analysts said.

"Too early to tell, but I think the chance [to include more branded drugs and innovative drugs in the second part of the EDL] is low. The basic idea for the EDL is to provide affordable medicines, and drugs with premium prices may not fit these criteria, although they should be included on medical merits," Li Bin, executive director of the research department at Morgan Stanley, told PharmAsia News.

"As basic drugs to stock a rural grassroots institution, the list seems reasonable, though we would still probably consider it a little over-balanced on the antibiotics," said L.E.K.'s Chen, who said she expected more basic items on the list such as standard generic chemotherapy drugs.

"Perhaps this can serve as an example that one list cannot meet all needs," Chen added.

All drugs listed on the EDL will be given a higher reimbursement rate than other drugs in the national reimbursement list. "It will lead the public to use essential drugs at a higher priority," said MOH.

China will release the new national drug reimbursement list in November, which will likely lower the margin of MNCs. Essential drugs are reimbursed for 80-90 percent of their cost, with some reimbursed as high as 95 percent," Kitty Lu, consulting manager of healthcare consulting firm Frost & Sullivan, told PharmAsia News in an earlier interview (Also see "China To Issue New National Reimbursement List In November; MNC Margin Likely Lower" - Scrip, 7 August, 2009.).

- Dai Jialing (j.dai@elsevier.com)

China Releases First Part Of Essential Drug List For Community Health Clinics And Rural Hospitals

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