Research On The Pharmaceutical Priceregulation In China

The pharmaceutical excessive price caused by the big gap between ex-manufacture pharmaceutical price and wholesale price in China is one of the key problems that have been increasingly focused on by the public. In order to constrain the rapid growth of unreasonable health expenditures and reduce patients’ financial burdens of pharmaceutical consumption, the China’s government has already adopted various policies to lower pharmaceutical prices since the government re-regulated pharmaceutical price in1996. Although these measures have prevented pharmaceutical price from further going up in some extent, the problem of the pharmaceutical excessive price has not been entirely solved. Since2000, the governmental regulation of pharmaceutical price has attracted more attention of domestic academe who concentrates on exploring the reasons of pharmaceutical excessive price and improving the policy recommendations of pharmaceutical price regulation. These researches have systematically analyzed the government pharmaceutical price regulation from the China’s existing health system, but there is not a convincing conclusion generally accepted how to lower the excessive price and solve the problem of government failure effectively. Correctly identifying the contributing factors determining the components of retail pharmaceutical price, deeply analyzing the impact degree and the functional mechanism of these factors on the retail pharmaceutical excessive price, putting forward policy recommendations to efficiently solve the problem of governmental regulatory failure, will have great significance both theoretically and practically for alleviating the citizens’ burdens of health expenditures and improving the efficiency and benefit of pharmaceutical industries. Based on the economics of regulation and economics of health, this dissertation considers the flaws in existing research and the practical problem of pharmaceutical excessive price and explores the key factors determining the retail pharmaceutical price from the theoretical and empirical prospects. It mainly covers the following:Firstly, based on the economics of regulation and economics of health, this dissertation analyzes the characteristics of pharmaceutical market and concludes that the pharmaceutical demand is influenced by such factors as imperfect information, physician’s prescription and third-party payment, the supply is restricted by patent right and governmental regulation. By analyzing the social health insurance system, the dissertation believes that neither natural monopoly nor patents provide a rationale for regulating pharmaceutical prices; the rationale for drug price regulation derives from pervasive insurance or third party payment. The dissertation also explores the different motivation of pharmaceutical price regulation between developed countries and China by comparing their regulatory policies. The dissertation considers that in the developed countries where pervasive insurance is adopted governments control pharmaceutical prices to lower the increasing health expenditure, while in China it is to control excessive pharmaceutical prices and reduce citizen’s pharmaceutical expenditure.Secondly, this dissertation examines the contributing factors causing excessive pharmaceutical prices through systematical and theoretical analysis and reliable empirical test. Based on the primary theoretical perspectives about the contributing factors determining the retail pharmaceutical price, it determines four most important contributing factors that might influence the retail pharmaceutical price such as separation of prescribing and dispensing, governmental regulation, concentration of wholesales and physician’s kickbacks from pharmaceutical prescription and explains how these factors influence the components of retail pharmaceutical price and puts forward four most important hypotheses. The dissertation uses the qualitative comparative analysis (QCA) method to empirically test the research hypotheses of contributing factors influencing the components of retail pharmaceutical price and the outcome shows that physician’s kickbacks from pharmaceutical prescription is the necessary condition influencing the retail pharmaceutical price components, while the others are not proved.Thirdly, by explaining the existing pharmaceutical price regulatory patterns the direct price control and mass pharmaceutical purchase by public tendering, this dissertation shows that the pharmaceutical price regulation failure results in excessive pharmaceutical price, anti-price competition of pharmaceutical market and low priced pharmaceutical disappearing from market. Through exploring the pharmaceutical price regulatory experiences in Japan and Korea, this dissertation analyzes the reasons for pharmaceutical price regulation failure in China and believes that because of the information asymmetry between regulatory authority and manufacturer, the cost plus pricing provides some possibility and operating space for manufacturers to report false cost and raise the manufacturer price which is finally checked by regulatory authority and leads to governmental pharmaceutical price regulation failure.Finally, in view of the successful practice of pharmaceutical price regulation in developed countries and considering the existing health system and the market characteristics in China, the dissertation puts forward to adopt the reference price and fixed compensation policy can restrict physician’s behavior of prescribing pharmaceuticals with kickbacks and encourage hospitals to purchase low priced pharmaceuticals. It will be necessary for this pharmaceutical use situation to induce pharmaceutical manufacturer to set lower prices and the pharmaceutical price will decrease continuously.