Docs of Shanghai - Pharmaceutical Executive


Docs of Shanghai
They're short on status, pay, and respect, but China's young doctors hold keys to the world's fastest growing pharmaceutical market.

Pharmaceutical Executive

Xi Zhimin, MD
New economic reforms instituted in 1978 by Deng Xiaoping, the Communist Party Chairman who succeeded Mao Zedong, marked the beginning of a massive and dramatic shift to a market economy, bringing relative prosperity and modernization almost overnight, especially to the cities. A quarter century later, China has taken center stage in the world trade arena, promising vast opportunities as the world rushes to market to the most populated country on earth. Participation in the global economy has bred a new generation that is eager to learn from the West and embrace the explosive growth around them. Unfortunately, this thrust toward a brighter and better market economy has not produced favorable changes in the healthcare sector. In line with privatization, the government has started reducing financial subsidies for healthcare, and the safety net provided by the government has largely disappeared. At the same time, there has been little growth in the infrastructure necessary for a free-market healthcare system.

As they were in the time of Mao, hospitals continue to be the primary source of healthcare today, providing 80 percent of all inpatient and outpatient care. Most hospitals are owned and operated by a complex matrix of central and local governments, although a small number of private hospitals has emerged. Continuing the tradition of a very nominal fee for medical services, hospitals charge very little for patient visits. An outpatient visit to a hospital in Shanghai, for example, costs eight yuan, about one US dollar, or less than half the cost of a cup of coffee at the increasingly popular Starbucks coffee shops now dotting China's urban landscape. Ten years ago, a doctor visit cost one yuan, while a trip to the zoo cost two. Doctors joked that people paid more to see a monkey than a physician.

Jin Yu, MM
Doctors' low fees are offset by revenue from the hospital pharmacies, which dispense 85 percent of all prescription drugs. Although the government controls wholesale and retail drug prices, the system still allows for big mark-ups by the hospital pharmacy. Reports vary on the exact contribution of prescription drugs to hospital revenue. But students of the Chinese health system agree that hospitals would not be solvent without the income generated by pharmacies and high-tech diagnostic services. This financial model has far-reaching ramifications in pricing and resource allocation. Consumers complain frequently about overprescribing and high prices at hospital pharmacies. In July, a survey revealed that consumers paid about 300 percent more for amoxicillin at hospital pharmacies than retail pharmacies.

When almost everyone in China worked for the government, almost everyone had health insurance. As privatization reduced the number of state-owned businesses, many jobs left the public sector, but most of those did not take health coverage with them. Government workers are still covered, but many in the new private sector are not. According to some estimates, one in three non-government workers has at least limited health insurance. According to other estimates, the figure is one in 10. To address the need for health insurance, particularly in urban areas, local governments have instituted insurance programs calling for cost sharing by employers, employees, and the government. Such coverage typically includes outpatient and inpatient care, as well as prescription drugs, if purchased at the hospital pharmacy or at pharmacies authorized by the health plan.

Doctors see
Private insurance is also growing, despite a lack of uniform billing procedures and standardized costs. At the same time, increased insurance costs and reimbursements will drive healthcare expenditures higher. These problems are emerging in the cities first, but urban dwellers are still far more fortunate than their rural counterparts. In China's countryside and less developed areas, healthcare is often unavailable or unaffordable.


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