Until it is possible to reduce the patient's share of healthcare costs and improve physician compensation, consumer education may help smooth the interaction between doctors and patients. Pharmaceutical companies can support the doctor through patient education materials that help set realistic expectations and engage patients in managing their health. A patient who is well-prepared for an appointment with the doctor, and one who knows what questions to ask, will make their brief interchange much more productive. Consumers will benefit as doctors' pay rises and they are less tempted by red packets. A few departments are already turning them down. "We don't accept them," says Dr. Jin Yu, a thoracic surgeon at Xinhua Hospital in Shanghai. "Our department head does not accept them, so the rest of the staff follows suit."

Selling to the Doctor

Despite the reluctance of some doctors to take red packets from patients, the first and foremost priority of pharmaceutical representatives is to address the material needs of doctors: Meals, travel, honoraria, and consulting fees are all expected and accepted. Sometimes things go too far. Some sales reps give outright kickbacks or purchase CME credits as a "convenience" to the doctor. The latter practices are commonplace in smaller hospitals and on the outskirts of cities. These are generally the roaming ground of local pharmaceutical companies, which have an estimated 80 percent market share in China's current market. In these settings, there is little, if any, clinical content in the sales call.

Unlike Dr. Xin, most Chinese doctors rarely see a sales rep from a Western pharma company. Pharma calls on the Category III hospitals—roughly the largest 800 of the 12,143 integrated hospitals. Most of the remaining hospitals—close to 93 percent—purchase medications from the domestic pharmaceutical companies that control the lion's share of the market. By some estimates, Western pharma calls on only 20,000 doctors
in China.

Formulary decisions are made at both the hospital and the insurer level. Adherence to formularies is strict. The process for securing formulary acceptance is similar to that of the United States. This applies to both Western medicine and TCM. Both are offered in the hospital pharmacy.

A Look into the Future

While China's healthcare system has lagged behind the rest of the economy in the rush to free markets, changes are taking place. In the next five to 10 years, expect a market-driven healthcare economy to begin responding to patients' demands. China's membership in the World Trade Organization (WTO) will, over time, mean better protection of intellectual property, lower tariffs for imported pharmaceutical products and, overall, fewer regulatory hurdles. One example is a change in the definition of new drugs, from "drugs not previously manufactured in China" to "drugs not previously marketed in China," which in effect, eases the application process for new drug registration. Such changes will, in turn, benefit China's healthcare system by bringing the latest advances in medicine to a country that aspires to a world-class healthcare system. Most important, growth is inevitable. China's national healthcare expenditure per capita was $55 per year in 2002, as compared to $5440 per year in the United States. China accounts for 20 percent of the world's population, but only three percent of the total global health expenditure. But at the current annual growth rate of 15 to 20 percent, China's pharmaceutical market will reach the top-five in total expenditures by 2010. These changes portend a bright future for China's doctors, and for the companies eager to harness their prescribing power.

Lena Chow is the chairman and chief executive officer of JYT Health Media Corporation. She can be reached at lena.chow@jythealth.com

Acknowledgement The author gratefully acknowledges the input and insight of her colleagues, Dr. Feiyan Shen, who introduced her to the Chinese healthcare market, and Dr. Jin Ming, who endured the eight-hour roundtrip bus ride from Shanghai to Ningbo with her.