National Promotion of Fujian and Sanming's Pioneering Healthcare Reforms: Key Innovations Driving China's Medical System Transformation

On November 15, 2019, the Leading Group for Deepening the Reform of the Medical and Healthcare System under the State Council issued the “Notice on Further Promoting the Experience of Fujian Province and Sanming City in Deepening the Reform of the Medical and Healthcare System” (hereinafter referred to as the “Notice”), requiring all localities to actively draw on the reform pathways and practices of Fujian Province and Sanming City to address the pain points and bottlenecks faced by the public in accessing medical care.

In recent years, Fujian Province and Sanming City have made numerous bold innovations and breakthroughs in healthcare reform, earning repeated national recognition. With the issuance of this notice, the national roadmap for healthcare reform has gradually become clear.

Integrated Reform of Healthcare, Health Insurance, and Pharmaceutical Services: Prioritizing Pharmaceutical Governance. Fujian Province and Sanming City have targeted the pharmaceutical sector as the breakthrough point for healthcare reform. By implementing measures such as volume-based procurement, consortium procurement, oversight of drug and consumable utilization, and direct settlement with medical insurance funds, they have eliminated gray areas in pharmaceutical distribution, reduced prices for drugs and medical consumables, and achieved a “cage-clearing” strategy to create fiscal space for subsequent reforms. Once these typical practices and experiences from Fujian and Sanming are promoted nationwide, they may fundamentally reshape the existing industry landscape.

Here, we review the innovative measures implemented by Fujian Province and Sanming City in pharmaceutical reform, as well as the nationwide adoption of their experiences and practices.

In June 2013, Sanming City established the Medical Security Fund Management Center, becoming the first in the province to achieve the “integration of three insurance schemes.” In July 2016, Sanming City took a further step by establishing the Medical Security Administration Bureau, the first of its kind in China, integrating responsibilities previously dispersed across the Human Resources and Social Security Department, Health and Family Planning Commission, Finance Department, and Medical Security Fund Management Center, so as to coordinate decision-making and plan the city’s medical and pharmaceutical system reform.

In July 2016, Fujian Province established the Provincial Healthcare Security Management Committee and its office, consolidating all healthcare security management functions previously dispersed across multiple departments—including Health and Family Planning, Civil Affairs, Finance, and Social Security—thereby putting an end to the fragmented “nine dragons ruling the waters” scenario in healthcare reform.

In May 2018, the National Healthcare Security Administration was officially established, integrating relevant responsibilities from the Ministry of Human Resources and Social Security, the National Health and Family Planning Commission, the National Development and Reform Commission, and the Ministry of Civil Affairs. It was tasked with coordinating the “Three-Medical Linkage” reform—encompassing medical care, health insurance, and pharmaceuticals—and assumed full responsibility for drug procurement.

Currently, Fujian Province and Sanming City have both achieved direct payment and settlement of medical insurance funds to pharmaceutical enterprises through the functions available on the online "Sunshine Drug Procurement" platform. This measure reduces intermediaries in fund circulation, accelerates payment cycles, lowers corporate capital costs, and resolves the issue of "triangular debt." Meanwhile, by handling payment settlements on behalf of relevant parties, regulatory authorities can promptly access drug procurement information, thereby providing data support for precise drug regulation and control.

In the “Notice” recently issued by the State Council, it is explicitly required that “pilot provinces for comprehensive healthcare reform shall take the lead in promoting direct settlement of drug payments between medical insurance handling agencies and pharmaceutical manufacturers or distributors, while other provinces shall also actively explore this approach.”

Since October 2013, Sanming City has implemented procurement at the lowest prices while ensuring quality, strictly enforcing the “one drug, two specifications” policy (i.e., one drug variety with two specifications), and successively completed three rounds of joint price-capped drug procurement. This initiative essentially leveraged the aggregated procurement volume across the entire city of Sanming to negotiate lower prices from manufacturers, which can be regarded as the precursor to volume-based procurement.

In November 2018, the state launched a pilot program for centralized drug procurement in the “4+7” cities, with “agreed purchase volume” as one of the key highlights of this initiative. This led to a significant drop in drug prices, and by September 2019, the program was expanded nationwide.

In June 2019, Fujian Province became the first province in China to fully implement the results of the national “4+7” centralized drug procurement program across its entire jurisdiction. Official data showed that within two months of implementing the “4+7” policy, Fujian Province saved RMB 194 million in related pharmaceutical expenditures.

Since March 2016, Sanming City has successively signed agreements with multiple regions to establish the National Alliance for Joint Price-Capped Procurement of Drugs and Medical Consumables (also known as the Sanming Alliance), implementing inter-provincial, cross-regional joint procurement. The alliance has now expanded to include 24 cities and 4 counties across 15 provinces, covering nearly one-tenth of China’s population. Member jurisdictions have achieved an average drug price reduction of 20%–40%.

In May 2017, the Fujian Provincial Platform for Sunshine Procurement with Joint Price Caps on Drugs and Medical Devices went online and achieved interconnectivity with the Sanming Alliance’s Platform for Joint Price-Capped Procurement of Drugs and Medical Devices. Public medical institutions in Fujian Province could redirect to the Sanming Alliance platform for procurement, thereby further expanding the market capacity of the Sanming Alliance.

In November 2018, the state implemented the “4+7” centralized drug procurement pilot in 11 cities through a model characterized by “state organization, alliance-based procurement, and platform-based operation,” achieving desirable outcomes. Subsequently, in September 2019, more than 20 provinces and regions were organized to form a procurement alliance, thereby expanding the “4+7” initiative nationwide.

In 2013, the Sanming Municipal Committee commissioned the Xiamen Haixi Pharmaceutical Trading Center to design and develop a new digital platform for implementing joint price-capped procurement and settlement of pharmaceuticals and medical devices. Regulatory authorities can conduct full-process supervision through the platform, thereby technically ensuring the effective implementation of Sanming’s “Three-Medical Linkage” reform.

In 2017, Fujian Province drew on the experience of Sanming to establish a new provincial-level platform, implementing the “Four Unified” coding system and the “Four Price” standards. It successfully carried out provincial joint price-capped and transparent procurement of pharmaceuticals and medical devices, and achieved functionalities such as online verification of the “Two-Invoice System” and multi-dimensional supervision of the entire pharmaceutical procurement process.

In April 2019, the National Healthcare Security Administration (NHSA) initiated a tender for the construction of the National Drug and Medical Consumables Procurement and Bidding Management Platform. Xiamen Haixi Pharmaceutical Exchange Center, the platform service provider for Sanming and Fujian Province, won the bid. This platform will provide national-level application support for drug and medical consumables procurement and bidding to the NHSA, offering standardized guidance and unified information monitoring for such procurement activities conducted by healthcare security departments across China.

In April 2012, Sanming City placed key monitoring on 129 specifications of so-called “miracle drugs”—characterized as adjunctive or nutritional agents with high kickbacks and “uncertain efficacy but very certain prices.” In that month alone, pharmaceutical expenditure decreased by RMB 16.7303 million. This measure alone saved nearly RMB 200 million in drug costs annually.

In May 2017, following the official launch of Fujian Province’s Joint Price-Capped Sunshine Procurement Platform for Drugs and Medical Devices, routine regulatory oversight was implemented through the platform for drugs not essential for disease treatment, those with high transaction volumes, and those exhibiting abnormal sales and usage patterns. In April 2019, the Fujian Provincial Healthcare Security Administration issued a notice specifying the need to strengthen supervision over six categories of drugs designated as key monitoring targets under the provincial medical insurance program.

In July 2019, the National Health Commission issued a notice that included 20 widely used drugs in clinical practice in the National Key Monitoring Catalog, and required all medical institutions to establish management systems for the rational use of key monitored drugs, strengthening full-process management of the clinical application of drugs listed in the catalog.

In January 2013, Sanming City issued a notice requiring the full implementation of zero-markup drug sales, mandating that all medical institutions, particularly hospitals at or above the county level, eliminate drug markups.

In July 2015, Fujian Province implemented a “zero markup” policy for drugs (and consumables) across the entire province, completely abolishing the drug sales markup policy.

In May 2017, the General Office of the State Council issued the “Key Tasks for Deepening the Reform of the Medical and Health Care System in 2017,” requiring that comprehensive reform of public hospitals be fully advanced across China by the end of September of that year. All public hospitals nationwide were to eliminate drug markups entirely, thereby marking the end of the historical practice of “subsidizing medical services with drug profits.”

In 2009, Fujian Province, as a pilot province for comprehensive healthcare reform, became the first in China to implement the “Two-Invoice System,” under which pharmaceutical manufacturers bid directly for drug procurement, bypassing intermediaries, and adopting unified procurement, pricing, and distribution.

In June 2013, Sanming City issued a notice requiring strict implementation of the “Two-Invoice System”: Under the model of “pharmaceutical manufacturer – distributor – medical institution,” one invoice is issued from the pharmaceutical manufacturer to the distributor, and a second invoice is issued from the distributor to the medical institution, with goods accompanied by invoices, thereby preventing counterfeit and substandard drugs from entering the supply chain.

In December 2016, the Office of the State Council Leading Group for Healthcare Reform officially issued the “Notice on Issuing the Implementation Opinions (Trial) on Promoting the Two-Invoice System in Drug Procurement by Public Medical Institutions,” requiring pilot provinces (autonomous regions and municipalities) for comprehensive healthcare reform and pilot cities for public hospital reform to take the lead in implementing the “Two-Invoice System,” with the goal of rolling it out nationwide by 2018.

Currently, healthcare reform has entered a deep-water zone and a critical period of tackling hard challenges, reaching a key stage that requires addressing the most difficult issues. Interest adjustments have become more complex, and contradictions within systems and mechanisms have become more prominent. Fujian Province and Sanming City have earnestly implemented the decisions and arrangements of the CPC Central Committee and the State Council, advancing healthcare system reform with practical efforts, thereby establishing the "Fujian Model" and "Sanming Model" for national healthcare reform. Nothing comes into being without cause, and nothing succeeds without reform. It is expected that, under the correct leadership of the state, the healthcare reform experiences of Fujian and Sanming will flourish across China, releasing greater reform dividends and benefiting more people.