NDRC Explicitly Encourages Prescription Referral, Driving Pharmaceutical Sales Toward Retail Channels

Source: Economic Information Daily

On July 25, the National Development and Reform Commission (NDRC) released the “Plan for Division of Responsibilities among Departments on Key Tasks under the Guiding Opinions on Promoting the Healthy Development of the Pharmaceutical Industry” (hereinafter referred to as the “Plan”). Meanwhile, the prohibition against medical institutions restricting the outflow of prescriptions was reaffirmed.

The Plan proposes to complete the research and formulation of catalogs for innovative and high-quality drugs and medical devices by the end of 2017. In 2016, the initiative to establish demonstration bases for drugs and medical devices in large hospitals was launched and implemented. Pharmaceutical and medical device enterprises are encouraged to collaborate with large hospitals to build demonstration application bases and training centers for innovative drugs and medical devices, thereby fostering a virtuous cycle encompassing demonstration application, clinical evaluation, technological innovation, and widespread adoption.

Furthermore, the Plan provides direction for new drug R&D, requiring focused development of therapeutic agents with targeted action, high selectivity, and novel mechanisms in areas such as oncology, cardiovascular and cerebrovascular diseases, diabetes, neurodegenerative disorders, psychiatric conditions, highly prevalent immune-mediated diseases, major infectious diseases, and rare diseases. It also emphasizes the generic production of off-patent foreign drugs that have significant market potential and are urgently needed in clinical practice. In terms of medical device R&D, the Plan calls for the development of high-end implantable and interventional products, including heart valves, cardiac pacemakers, fully bioresorbable vascular stents, artificial joints and spinal implants, and cochlear implants, as well as mid-to-high-end rehabilitative assistive devices.

The “Plan” further clarifies the need to improve the development environment for medical institutions established by non-governmental entities, ensuring equal treatment for all medical institutions in areas such as market access, designation as social insurance providers, construction of key specialties, professional title evaluation, academic standing, and institutional grading assessments.

Notably, the prohibition on medical institutions restricting the outflow of prescriptions has been reiterated. The Plan requires medical institutions to issue prescriptions using the generic names of drugs and proactively provide patients with their prescriptions, thereby safeguarding patients’ right to choose where to purchase medications. It also promotes equipment sharing among medical institutions of all ownership types and advances mutual recognition of test results across medical institutions.

Since the launch of the new healthcare reform in 2009, a series of policies have been implemented to promote the separation of prescribing and dispensing. Multiple policy documents issued previously have explicitly called for advancing this separation through various forms, prohibiting hospitals from restricting the outflow of prescriptions, and allowing patients to freely choose whether to purchase medications at hospital outpatient pharmacies or at retail pharmacies with a prescription.

However, for many years, under the healthcare environment characterized by “funding hospitals through drug sales,” the pattern of public hospitals dominating the prescription drug market has not been completely transformed. According to calculations by Haitong Securities, the proportion of drug revenue in total hospital revenue in China was approximately 38% in 2014. If this ratio were reduced to 30%, it would mean that more than one-quarter of all pharmaceutical products would be displaced from hospitals. In the structure of hospital medication usage, approximately 55% consists of injections and 45% of oral formulations. Due to the higher risks associated with injections and the lack of outpatient injection channels outside hospitals, only oral formulations can shift to out-of-hospital settings. Given that over one-quarter of the total drug volume is to be displaced from hospitals, and considering that only oral formulations—which account for less than half of hospital medication usage—can be displaced, this implies that half of all oral formulations will be shifted to retail terminals.

Industry insiders believe that the introduction of prescription drugs will have a profound impact on the business models of retail pharmacies. This includes direct engagement with a large volume of patients suffering from chronic and critical illnesses, which will significantly enhance the channel value and bargaining power of retail pharmacies vis-à-vis pharmaceutical manufacturers. Furthermore, the accumulation of patient resources and big data will enable retail pharmacies to effectively implement innovative services such as pharmaceutical care and chronic disease management, potentially fostering deeper business model innovations in collaboration with basic medical insurance and commercial insurance. In addition, some foreign pharmaceutical companies that previously paid little attention to the retail market have established dedicated retail teams; firms such as AstraZeneca, Merck & Co., and Sanofi are actively entering the pharmacy retail sector.