Even if 50% of the drug price is used for rebates, the price of drugs will only double from the manufacturer to the end consumer. In recent years, news media have repeatedly tracked the circulation of medicines and found that when medicines reach the hands of consumers, prices are even more than ten times the ex-factory price. What is going on here?

"More than 90% of medicines have price cuts, prices are cut 50%, and there is no problem at all." At the group discussion of the Guangxi delegation, the National People's Congress (NPC) deputy and chairman of Guangxi Huahong Pharmaceutical Co., Ltd., Wei Feiyan, was shocking. With regard to the reasons for the high drug prices, the representative of pharmaceutical company CEO Wei Feiyan pointed out that it was caused by high medical marketing rebates. According to some news media reports, marketing rebates sometimes account for 50% of drug prices. If they are deducted, drug prices can indeed be cut by 50%.

However, even if 50% of the drug price is used for rebates, the price of medicines will only double from the manufacturer to the final consumption. In recent years, news media have repeatedly tracked the circulation of medicines and found that when medicines reach the hands of consumers, prices are even more than ten times the ex-factory price. What is going on here?

The deep-seated reason for the high drug prices was pointed out by another deputy to the National People's Congress. "Drug prices are the most sensitive and complex in medical reform," said Zhu Wenchen, deputy chairman of the National People's Congress and chairman of the Henan Furen Pharmaceutical Group. The ex-factory price of drugs includes a commission of approximately 15% to 20%, which is a hidden rule in the industry. The inflated drug prices are raised in the circulation of drugs. In the end, patients get higher drug prices from the hospital.

Zhu Wenchen's representative pointed out another reason for the rise in drug prices. This is not as familiar as the drug rebates. However, as the representative of Zhu Wenchen said, it is “the most sensitive and complex” in medical reform. This is the key to the rise of drug prices after they leave the factory: "enhanced layers." Because medicine has too many levels in circulation, each level must earn a little money, although as Wei Feiyan's representative complained, each link is handy and the profit earned by his hand is very low, but because there are too many levels, Still pulled up drug prices.

The beginning of medicine circulation

Then, what are the levels of medicine circulation, how are these layers produced, and how does it affect the price of medicine? Like talking about many reforms, our vision will return to the distant “before liberation”.

The old China before liberation was an agricultural country, and the natural economy played a leading role. Each county and township in the country could form an autonomous agricultural economic system. In the era of the Republic of China, although the “Likin” system for taxation of domestic trade was finally cancelled by the “Youbang” protest, China still did not have a unified market, and domestic trade still has great resistance. New China built its government, efficiently used the planned system to break into various small-scale farming economic circles, and gradually established a three-tiered pharmaceutical wholesale system that was monopolized by state-owned enterprises, dominated by regulations, and purchased under contract. The Chinese pharmaceutical company passed a large administrative area under its jurisdiction. The grade-level medicine wholesale station transfers medicines to pharmaceutical companies of all provinces, autonomous regions, and municipalities directly under the Central Government, that is, second-grade medicine wholesale stations. The second-level wholesale station distributes medicines to pharmaceutical companies at the city, prefecture, and county levels, that is, third-grade wholesale stations, through the aforementioned wholesale links. Pharmaceuticals enter the sales terminal, namely hospitals, health centers and pharmacies.

Since the mid-1980s, with the gradual deepening of the reform of the economic system, the government has begun to push the pharmaceutical commerce to the market, cancel the provisions of unified purchase and underwriting, allocate funds by level, and adjust the mandatory plan as a guiding plan, implementing “multiple channels and less Link". The system at all levels of wholesale stations can be used to purchase medicines from pharmaceutical companies; subordinate companies at all levels of wholesale stations are starting to run companies to sell medicines. Pharmaceutical companies have also begun to enter the commercial field to engage in sales activities, while some new start-up wholesale companies are beginning to emerge. However, the results of the reform are not satisfactory. At this time, our country's market economy is still not perfect, and the unified market has not yet formed. The channel cost has become the biggest cost of commodity sales. Therefore, the newly established companies at all levels, based on geographical and administrative divisions, are interlinked, forming a tens of thousands of pharmaceutical sales companies and building a huge but complicated pharmaceutical distribution industry. Although there are many channels for the circulation of medicines, the framework still refers to the old system.

Changes in the medical distribution concerto

The pharmaceutical distribution industry has great significance in the pharmaceutical industry. It has two major functions: First, the agency function. The agency system can effectively help production companies solve drug sales channels and payment problems, and reduce drug factory costs. The other is the wholesale distribution function. There are certain circulations and time lags in the circulation of pharmaceuticals, which require the use of warehouses, etc., for turnover, and pharmaceutical distribution companies need to distribute to different customers. This kind of physical distribution and distribution function is incapable of or unwilling to bear the responsibility of a single production enterprise, especially some enterprises producing small varieties. However, drug distribution enterprises can achieve this through scale and intensification.

The pharmaceutical distribution industry is an inevitable part of the social division of labor and provides efficiency for the development of the pharmaceutical industry. At this time, with the deepening of the market economy and the advancement of pharmaceutical R&D, the new drugs are changing rapidly, and new drugs that need to occupy the market as quickly as possible to obtain high profits are not satisfied with the low-profile sales model that has been surmounted by the public. They urgently need to realize sales. People - that is, doctors who prescribe their prescriptions, notice themselves as soon as possible; tens of thousands of pharmaceutical circulation companies that are in severe competition are also eager to win the competition, and new medical circulation technologies have emerged.

This new technology is an exotic product grafted onto existing pharmaceutical distribution channels: a dedicated promotion company, where pharmaceutical representatives complete the promotion activities for hospitals and doctors who decide to meet patients with drugs, promote drug sales, and medical representatives are managed by agency companies. The emergence of medical representatives has its progress. After all, the development of modern medicine has led to rapid renewal and upgrading of medicines. Doctors are busy working on weekdays, and it is not easy to catch up with the pace of medical development. It is difficult to update drug knowledge in a timely and accurate manner. The pharmaceutical industry specializes in surgery and can become a useful assistant for doctors to popularize the latest medication knowledge. However, the ill-considered problem of corruption also comes with medical representatives. What is even more frustrating is that every member of the medical system, although you can hear their complaints about the system from their mouths, it seems that all of them are conniving and relying on the environment that causes the accumulation of disadvantages. This leads to the price of medicine becoming Zhu. Wen Chen represents the “most sensitive and complex” part of medical reform.

Due to insufficient government investment in public hospitals, public hospitals have obtained private licenses to “prescribe drugs for medical use.” Drugs sold to patients can be increased by 15%. Naturally, the higher the price of medicines, the more welcomed by hospitals and doctors who can obtain improper benefits from them. Although representatives of pharmaceutical companies such as Wei Feiyan said, “Most drug companies have not benefited from the difference in drug prices,” “Wei Feiyan’s representative also stated that the use of rebates in promotional sales has made drug companies very tired, and some have even taken illegal academic meetings. "Invoices come in," but this is their way of life after all. None of the tens of thousands of pharmaceutical distribution companies want to be redundant in the market. Although they are limited to scale, logistics distribution, and scale are limited, there is no profit without efficiency, but they continue to vicious competition and control their own jobs. Social stability, employment, and the status of the state-owned assets of a considerable number of pharmaceutical distribution companies mean that the industry is hard to return.

Accumulate hard to return?

Since the main problems in the circulation of medicine are: excessive levels, low concentration of the industry, low scale, low level of logistics distribution, high operating costs, resulting in excessively high drug circulation costs. Then, by strengthening industrial concentration and developing modern logistics, we can naturally solve this problem.

Judging from the experience of developed countries, the increased market concentration in the production and wholesale of pharmaceutical products will help strengthen the effective management of the pharmaceutical market supervision by the government, and it will also help reduce the regulatory costs of the relevant departments. Therefore, on the basis of the existing centralized drug procurement system and online drug bidding and procurement platform that has been basically completed, the establishment and operation of a provincial-level drug procurement platform should be promoted, with the province as the unit, with a focus on the primary Wholesalers and large pharmaceutical companies purchase directly. The market should be used to promote the integration of resources, and gradually lead to a batch of primary wholesalers and pharmaceutical companies with regional logistics distribution capabilities. This will not only reduce the procurement costs of medicines, but also accelerate the survival of the fittest among pharmaceutical distribution companies and achieve industrial concentration.

In order to achieve this goal, the government should open up the market, encourage competition, eliminate a group of backward companies, allow strong pharmaceutical companies and pharmaceutical wholesale companies to grow and develop, and thus increase the degree of market concentration; at the same time, relevant departments should work to reduce local The interference of protectionism eliminates discrimination in the ownership of enterprises, breaks down the regional market segmentation, and promotes the establishment of a wide-area, highly efficient pharmaceutical logistics and distribution network, so as to increase the efficiency of drug distribution and ultimately reduce the cost of circulation.

While reducing unnecessary levels and costs in the circulation of pharmaceuticals, let us review the opening of this article and talk about how to cut off the 50% marketing rebate that Wei Feiyan admits.

In order to make up for the shortfall caused by insufficient financial investment and the low price of a series of medical treatment items represented by the labor price of medical personnel, the hospital sought to increase the price of medicines and consumables. By relieving the pricing of some medical services and raising the pricing of another part of medical services, this is a special “double-track” phenomenon in the pricing of medical services. Hospitals do not rely on “curing the disease” but rely on “selling drugs” to realize the value of medical services. This is “the use of medicine to provide medicine”. In order to achieve “the loss of embankments in the embankment”, the hospital formulated internal incentive measures to urge medical staff to induce patients to over-consume, and the problem that arises is the root cause of medical corruption problems including rebates. The key to the repeated prohibition of marketing rebates for pharmaceuticals and medical technology services lies in the abolition of the system of “taking drugs to support medicine”. The government must ensure the financial compensation of public hospitals, but also change the pricing of medical services so that medical services reflect the economic value they deserve. The value of medical services should depend on how much reasonable treatment the patient has received, rather than on how much treatment the patient has received. By abolishing the encouragement of hospitals in inducing the consumption of medical personnel, we ensure that society respects the work and personality of medical personnel, promote the morality and self-discipline of medical personnel, and cut down the survival of marketing rebates.

As a result, we will not only harvest 90% of the price of drugs by 50%.