China Launches First Provincial Alliance Procurement for Decoction Pieces, Emphasizing Quality-Based Premium Pricing Over Cost Cutting
Latest Developments in China’s First Inter-Provincial Joint Procurement of Traditional Chinese Medicine (TCM) Decoction PiecesYesterday afternoon (October 27), the Information Office of the Shandong Provincial People’s Government held a press conference, inviting officials from the Shandong Provincial Healthcare Security Administration and other relevant parties to introduce policies and initiatives supporting the inheritance, innovation, and development of traditional Chinese medicine (TCM) under the provincial healthcare security system. Qiu Bingyu, First-Level Inspector of the Shandong Provincial Healthcare Security Administration, presented details on the nation’s first inter-provincial joint procurement pilot for TCM decoction pieces, led by Shandong Province, drawing significant attention from the industry toward this collaborative procurement model.
Chou Bingyu introduced that, in response to issues such as significant quality variations, high price volatility, unstable supply, and irregularities in the production and distribution markets of traditional Chinese medicine (TCM) decoction pieces, 21 types of TCM decoction pieces with high clinical usage were selected this year as the initial focus. Led by Shandong Province, China’s first inter-provincial centralized procurement initiative for TCM decoction pieces has been launched. This initiative will play a significant role in improving standards and quality management systems for TCM materials, regulating production and distribution markets, encouraging enterprises to place greater emphasis on standard compliance and quality management, enabling medical institutions to conduct online and transparent procurement, promoting the healthy development of the TCM industry, enhancing the quality of procurement by medical institutions, and meeting the public’s healthcare needs. It will benefit enterprises involved in the cultivation, processing, and sales of TCM materials, TCM manufacturing companies, and the general public.
According to the Office of the Inter-Provincial Chinese Herbal Medicine (Material) Procurement Alliance under the Sanming Procurement Alliance, this joint procurement initiative will adopt preferential policies for large-scale cultivation bases of authentic Chinese herbal materials. It aims to guide standardized and regulated cultivation of such herbs, which holds significant importance for enhancing the clinical efficacy of Traditional Chinese Medicine (TCM), ensuring the long-term stability of the TCM industry, and achieving the goals of “quality assurance, grade improvement, and stable supply.” Furthermore, it will support the implementation of the national rural revitalization strategy and increase the income of Chinese herbal medicine growers.
Unlike the centralized volume-based procurement (VBP) for chemical drugs, the inter-provincial joint procurement of Traditional Chinese Medicine (TCM) decoction pieces is explicitly not price-reduction oriented. The subtle linguistic distinction between “joint procurement” for decoction pieces and “centralized procurement” for chemical drugs clearly reflects that the former is more closely aligned with industry-specific characteristics and will rely more heavily on market-based transaction mechanisms. Advocating for “quality assurance, grade improvement, and stable supply” to promote the healthy development of the industry constitutes the core principle of the inter-provincial joint procurement of TCM decoction pieces, led by Shandong Province.
In January this year, the Sanming Procurement Alliance officially launched its first inter-provincial joint procurement initiative for traditional Chinese medicine (TCM) materials. The TCM Materials Zone of the Sanming Procurement Alliance—Shandong Internet TCM Materials Trading Center—has established five core systems, including quality control and traceability, through a digital platform. This initiative addresses numerous industry pain points in the circulation of TCM materials, establishes a transaction mechanism that ensures high quality at reasonable prices, and promotes the “quality assurance, grade improvement, and stable supply” of TCM materials across the alliance’s member provinces and cities.
To vigorously promote the inter-provincial centralized procurement of traditional Chinese medicine (TCM) decoction pieces, the Procurement Office of the Sanming Procurement Alliance’s Inter-Provincial TCM (Materials) Procurement Alliance has established a dedicated liaison office within the Shandong Provincial Healthcare Security Administration to undertake the organization and coordination of joint procurement activities. In March this year, the volume declaration process for the first batch of 21 TCM decoction piece varieties was launched.
Unlike Western pharmaceuticals, Traditional Chinese Medicine (TCM) decoction pieces require strict quality control throughout the entire process—from the cultivation and harvesting of raw materials to the processing and preparation of the decoction pieces—to ensure “premium quality.” Consequently, there is a significant cost disparity between high-quality and inferior-grade decoction pieces. The inter-provincial centralized procurement of TCM decoction pieces will leverage a “premium quality for premium price” mechanism to guide the industry, promoting overall quality assurance and upgrading in TCM, thereby supporting the high-quality development of Traditional Chinese Medicine.
At the review meeting of the Expert Group for Centralized Procurement of Traditional Chinese Medicine (TCM) Decoction Pieces, the experts concluded that the “premium quality, premium price” mechanism can influence suppliers at the source, guiding medicinal herb-producing regions to adopt standardized cultivation and production practices, thereby promoting the advancement of the TCM industry. Guided by this principle, the centralized procurement of TCM decoction pieces serves a dual purpose: on one hand, it promotes “quality assurance and grade improvement,” ensuring the quality of TCM decoction pieces and enhancing clinical efficacy; on the other hand, it drives market restructuring by establishing a unified national market for medicinal herbs and TCM decoction pieces characterized by high efficiency, standardization, fair competition, and full openness, thus comprehensively accelerating the industrialization and modernization of the TCM sector.
Price volatility is another key challenge that joint procurement of traditional Chinese medicine (TCM) decoction pieces needs to address. Recently, many proprietary Chinese medicines have been withdrawn from procurement platforms in multiple regions, primarily due to rising production costs for manufacturers. The advantage of the Shandong Internet TCM (Medicinal Materials) Trading Center lies in its establishment of a full-process traceability and quality control system covering the planting source, aligned with the goals of “ensuring quality, upgrading standards, and stabilizing supply.” By fully integrating resources across the upstream and downstream sectors, the center achieves rational “balance” and “coordination” in supply, thereby minimizing the impact of upstream price fluctuations on the decoction pieces market to the greatest extent possible.
Promoting a virtuous cycle in the industry through “quality assurance, grade improvement, and stable supply” will play a fundamental role in fostering the healthy development of the traditional Chinese medicine (TCM) sector. Chen Jinfu, former Deputy Director of the National Healthcare Security Administration, previously stated that drug centralized procurement rules would not adhere solely to a “lowest-price” principle. Given the unique characteristics of TCM, “premium quality at premium prices” will become the guiding direction for the future strategic development of TCM decoction piece enterprises.