State Council Promotes Fujian Sanming's Healthcare Reform Model as China's Medical System Accelerates Digital Transformation

To fully leverage the demonstrative, breakthrough, and driving roles of typical experiences in overall reform, on November 15, the Leading Group for Deepening the Medical and Healthcare System Reform under the State Council issued the “Notice on Further Promoting the Experience of Fujian Province and Sanming City in Deepening the Medical and Healthcare System Reform,” requiring all provinces to promote the Fujian and Sanming experience in deepening medical and healthcare system reform in light of their local conditions.

As a national benchmark for healthcare reform, Fujian Province and Sanming City have leveraged the momentum of the “Internet Plus” Action Plan and the national big data strategy. By targeting pharmaceutical price reduction as a breakthrough point, they have empowered the coordinated reform of medical care, health insurance, and pharmaceutical supply through digitalization, thereby addressing industry pain points and responding to contemporary challenges. In doing so, they have pioneered a new digital pathway for comprehensive public hospital reform across China. The World Bank has fully affirmed these efforts, providing a $600 million loan to promote the Sanming healthcare reform model.

The tremendous momentum brought by digital transformation is propelling China’s healthcare reform onto the “fast track” of systemic improvement and efficiency enhancement.

For a long time, inflated drug prices have been the crux of the healthcare system due to multi-layered markups in pharmaceutical distribution and commercial corruption involving commissions and kickbacks. “No amount of money can plug this black hole.” Since 2012, Chen Zhu, then Minister of Health, has repeatedly emphasized that healthcare reform must abolish the practice of subsidizing medical services with drug profits and squeeze out the “inflated” markups in the pharmaceutical distribution chain.

Fujian Province and Sanming City have seized upon this critical pain point by successively establishing a joint price-capped, transparent procurement platform for pharmaceuticals and medical devices. Leveraging the internet’s advantages of decentralization, disintermediation, and transparency, they have made breaking the pharmaceutical profit chain the breakthrough point for healthcare reform. By utilizing “Internet Plus” and big data to facilitate volume-based price negotiations, they have significantly reduced the prices of drugs and medical consumables, thereby identifying the source of reform dividends.

The digital platform connects medical institutions, pharmaceutical companies, distribution enterprises, and healthcare security departments. Local healthcare security authorities are able to comprehensively monitor the regional status of drugs and medical consumables, placing key auxiliary, nutritional, and high-kickback “miracle drugs” under strict surveillance, and taking decisive action against artificially inflated drug prices. By leveraging shared multi-regional procurement catalogs and resources on the platform, and integrating historical price data, patient usage patterns, and regional healthcare capabilities, administrative bodies can calculate reasonable regional drug prices and establish standardized drug procurement catalogs.

This has made possible a key step in the coordinated reform of healthcare, medical insurance, and pharmaceuticals—“volume-based negotiated procurement.” Through the Sunshine Procurement Platform, medical insurance authorities directly engage with pharmaceutical trading entities to conduct online transparent bidding and price negotiations, leveraging volume to secure lower prices. By relying on platform-provided services such as distribution performance evaluation, online invoice verification, centralized settlement by medical insurance funds, and end-to-end supervision of drug procurement, the gray interest chain of pharmaceutical kickbacks has been successfully severed, intermediate costs such as those from circulation have been eliminated, and procurement prices have been effectively reduced. Furthermore, compared to the three-month to two-year cycle of traditional tendering and procurement projects, online joint sunshine procurement takes less than one month, significantly improving administrative efficiency.

From 2011 to 2018, the costs of pharmaceuticals and medical consumables in Sanming City decreased year by year. The basic medical insurance fund for urban employees turned from a deficit of RMB 210 million into a surplus of RMB 104 million in 2018, with cumulative savings of RMB 652 million from healthcare reform. As a result, residents have benefited, and the local medical insurance fund has resolved the issue of “insolvency.”

The surplus in the medical insurance fund has created room for adjustments to medical service prices. Doctors’ “gray income” has been transformed into “transparent income,” hospitals have shifted from relying primarily on drug revenue to prioritizing professional medical service revenue, and a public-welfare-oriented operational mechanism for hospitals has been established.

This is a manifestation of the “transparency” brought about by the internet. A relevant official from the Fujian Provincial Healthcare Security Administration stated that implementing sunshine procurement for pharmaceuticals through an information technology platform has enabled more comprehensive comparison of drug information, eliminated human interference, and allowed the department to fulfill its regulatory role in the circulation, purchasing, and sales of pharmaceuticals. The province was the first in China to launch an online public query service for drug price information, thereby promoting transparency in drug pricing and addressing persistent problems in the pharmaceutical procurement process.

This is the “secret” behind the success of healthcare reforms in Fujian Province and Sanming City: by leveraging a digital platform, it identified the key lever for driving integrated reforms across healthcare, health insurance, and pharmaceutical sectors, thereby resolving the problems of superficial coordination without substantive action, or fragmented actions without genuine integration.

The construction of standardized information platforms has also facilitated the rapid dissemination of the Fujian and Sanming experience models.

Since August 2015, Sanming City has successively signed agreements for joint price-capped procurement of pharmaceuticals and medical consumables with 24 cities across 15 provinces—including Hinggan League in Inner Mongolia, Tongren in Guizhou, Handan in Hebei, and the Eighth Division Shihezi of the Xinjiang Production and Construction Corps—as well as four national healthcare reform demonstration counties, thereby forming the Sanming Alliance.

Supported by the same platform service provider’s technical infrastructure, the Sanming Medical Device and Pharmaceutical Alliance Procurement Platform and the Fujian Province Joint Price-Capped Sunshine Procurement Platform for Pharmaceuticals and Medical Devices have achieved interoperability through data standardization. This integration breaks down regional silos, enabling end-to-end cross-regional processes for joint procurement, trading, settlement, and payment, thereby standardizing joint price-capped procurement of pharmaceuticals and medical consumables.

The platform also enables directory sharing. Member cities can access drug catalog prices from Fujian Province and other regions on the platform, facilitating rapid centralized procurement of drugs and consumables, dynamic cross-provincial price comparison, and elimination of inflated pricing for drugs and medical consumables.

According to official media reports from various regions, areas that have adopted the Alliance Platform have seen a general decline in drug prices of more than 20%, resulting in annual savings of hundreds of millions of yuan in pharmaceutical procurement costs. Taking Handan City, an alliance member, as an example, since it began using the Sanming Alliance Platform in July this year, the average price reduction for selected drugs through centralized bidding and procurement has reached 35.6%, with the maximum price reduction for a single product hitting 96.52%, thereby tangibly achieving cost reductions and benefiting the public.

“The Haixi Pharmaceutical Trading Center, as the platform developer, has deeply engaged in supporting the practical implementation of the Sanming healthcare reform. By leveraging big data collection and analysis, it has established an informational platform and bridge to promote the Sanming model, focusing on pharmaceutical procurement, settlement, and regulation.” This assessment was provided by relevant officials from the healthcare security administrations of several alliance cities.

In October 2018, nine prefecture-level cities in Fujian Province simultaneously implemented policies on the Provincial Drug and Medical Device Joint Price-Limiting Sunshine Procurement Platform, completing the online listing and trading tasks for 17 nationally negotiated anticancer drugs—one month ahead of the national requirement. This made Fujian the first province in China to implement the results of this round of national price negotiations. In March this year, Xiamen City, leveraging the Provincial Drug and Medical Device Joint Price-Limiting Sunshine Procurement Platform, became the first city in China to implement the centralized procurement and usage of winning bids from the “4+7” pilot program. Fujian Province rapidly rolled out the “4+7” centralized procurement results across the entire province, achieving savings of over RMB 194 million in related drug procurement costs within two months.

Leveraging the rapid expansion of digital platforms, the Fujian-Sanming model has introduced a new pathway for healthcare reform across China. Following the nationwide rollout of the “4+7” policy, the State Council issued the Notice on Further Promoting the Experience of Fujian Province and Sanming City in Deepening Healthcare System Reform. This directive reaffirms national-level encouragement for localities to actively adopt cross-regional alliances and other mechanisms to conduct volume-based procurement for drugs not yet included in existing schemes, while exploring centralized procurement of high-value medical consumables, thereby creating room for subsequent reforms.

Information serves as a critical basis for national governance. Due to issues such as insufficient information sharing in medical security, which constrained the efficiency of national governance and the level of public services, China drew on the experience of Sanming, Fujian Province, in 2018 to consolidate healthcare security functions previously dispersed across various departments, establishing the National Healthcare Security Administration. In April this year, the administration initiated a bidding process for the development of a national platform for drug and medical consumable procurement and trading. Leveraging the successful experience of Sanming, Fujian, the Haixi Pharmaceutical Trading Center was awarded the contract to build this platform.

The establishment of the National Drug and Medical Consumables Procurement Management Platform consolidates data across the entire process—including pharmaceutical distribution, clinical utilization, and health insurance settlement—further breaking down administrative and informational barriers. It aims to build a national information-sharing system that integrates healthcare services, health insurance, and pharmaceuticals (“Three-Medical Linkage”), thereby advancing the modernization of China’s healthcare governance system and capacity through digitalization.

This large-scale platform, featuring big data capabilities and substantial storage capacity, serves not only as a unified national system for pharmaceutical procurement, distribution, and settlement but also as an efficient platform for regulatory oversight. It will standardize and guide the tendering and procurement of drugs and medical consumables by healthcare security departments across China, implementing unified information monitoring. The platform supports comprehensive regulation with full traceability of regulatory data, efficiently facilitating the assessment and incentivization of medical institutions by healthcare security authorities to ensure effective implementation.

Li Ling, Director of the Center for Health Development Research at Peking University, believes that information platforms serve as independent third parties. They neither manufacture nor distribute pharmaceuticals, and are not entangled in the conflicting interests within the pharmaceutical production, distribution, and usage chains. By bridging regulatory bodies and the market, these platforms provide corresponding data and decision-making support for regulatory systems across all sectors. Furthermore, they ensure the professionalism and scientific integrity of data through robust information security measures.

On November 11, the National Healthcare Security Administration released the “Notice on Publicizing Information on the First Batch of Drugs in the Database of Medical Insurance Drug Classification and Codes,” launching the development of 15 standards for medical insurance information business coding. This initiative aims to accelerate the establishment of unified coding standards, creating a nationwide “common language” to facilitate centralized procurement and medical insurance settlement, and is regarded as a key step toward the digitalization of national drug and medical consumable procurement management.

In recent years, driven by the dual forces of policy and technology, the digitalization of China’s healthcare and pharmaceutical sectors has been accelerating. Capitalizing on this momentum, China’s healthcare reforms are deepening, with accelerated informatization to promote the equalization of basic public services. These efforts are guiding pharmaceutical companies onto a path of sustainable development, injecting new impetus into the transformation, upgrading, quality improvement, and efficiency enhancement of China’s pharmaceutical and healthcare industries.