When the Chinese government started to slash drug prices in 2018, it was only a matter of time before medical consumables would be affected. Then the payment reform – from the FFS payment model to DRGs is intended to change the providers’ behaviors in managing their finances by increasing their sense of cost ownership. Now the storms of direct price cuts on consumables initiated by local governments are expanding rapidly across the country.
The government-led price cut campaign started with Anhui province (a province in East China adjacent to Shanghai) in July where orthopedic implants (spinal implantation only) and ophthalmologic consumables (intraocular lenses) were chosen for applying the mechanism known as the “volume-based procurement”, which consolidates the annual volume from all the public hospitals in the province to only those tender winners. In the past, the provincial tendering process was merely a supplier and price registry process as procurement decision still largely sits with the individual hospitals.
It happened so quickly that many manufacturers didn’t have time to react. The news was released on July 3 and the results could be seen on July 30 with a dramatic price reduction of 53.4% on average with an estimated annual saving of RMB400 million (approximately $57 million USD).