The limit on the profit margin for the circulation of medical devices is set at $250. Articles included in the price monitoring range of medical devices, within a year if the actual factory or port price has risen more than 20%, producers and operators shall promptly inform the provincial pricing authorities and provide reasons. If no reason is given or the reasons are not acceptable, the provincial competent pricing departments may institute price-cap measures. According to Li Ying, Secretary-General of the Chinese Medical Device Industry Association, the views of businesses need to be considered, and the association has already reported this to the National Development and Reform Commission. The implementation details are still unknown.
The policy needs improvement according to Chen Liu Hai, Director of Marketing at Beijing Wandong Medical Equipment Co., Ltd., who comments that it only addresses disposable medical supplies and implanted medical devices, but does not cover large-scale medical equipment such as CT scanners. There are over 30,000 kinds of materials used in medical device products, each with different characteristics and significant price differences. Although the method aims to curb circulation profits, it requires more specific and detailed regulations for different materials.
An industry source mentioned that limiting the intermediate circulation increase rate can be described as a killer move to reduce the prices of medical devices. For instance, the ex-factory price of a heart stent might only be 3,000 yuan, but by the time it reaches patients, it could cost one or two million yuan or more. According to the draft requirements, currently, the draft has caused widespread concern in the industry. Some large medical device manufacturers believe that this plan does not differentiate between various types of supplies, lacking flexibility. Sales companies argue that producing and selling medical devices is a market behavior, difficult to control through administrative means alone.
Price regulation of medical devices should not only control the final sales link but start from the root. The windfall of medical devices results in suppressed prices, which then lead to inflated prices, making transplantation less effective. Sales of own production medical products often have to go through a medical device company. Therefore, medical equipment from manufacturers looking for exclusive agents for their products, these exclusive agents then find regional agents, who ship to provincial distributors, setting up dealers at all levels until reaching hospitals. Each agent or part increases the price proportionally, resulting in layers of circulation increasing prices. Prices in the hands of medical equipment reaching patients differ from the ex-factory price by at least 10 times, sometimes 20 or even 30 times.
Compared to holding down prices, this ratio is not high. The base price of drugs might only be a few dollars, meaning the price reaching patients would be greatly reduced to around 3750 yuan. However, dealers suggest that the above requirements can take many alternative approaches, such as signing treaties with manufacturers to improve the ex-factory price of the product and then following the national fare increase proportion. But the manufacturer, through consulting fees, asks for the nominal current ex-factory price and the difference between the original price to be returned to dealers, who then give part of the money as kickbacks to doctors, so that the price remains unchanged or may even lead to people incurring debt.
However, the inflation of medical equipment prices is not due to the manufacturer; most of the profits are consumed during circulation. A popular sentence in the industry says: "The knife might as well pour the drug." The inflated portion brings 30 percent to 40 percent profit to hospitals, while dealers get 20% to 30%, with the remaining part distributed to departments and doctors. Such a route map: manufacturers of medical devices, according to existing policies and regulations, cannot directly sell without going through intermediaries—thus, even if the base price of medical devices is in the hundreds or thousands, after circulation, they are sold for tens of thousands or even unrealistically high amounts for millions.
The biggest problem is how the price should be controlled. Professor Zhang Yingmin of Anesthesiology at Hospital 7304 believes that solving the problem of inflated prices of medical devices is actually facing a test of national policy. To achieve control over the ratio of medical devices fare increase, the State must introduce supporting policies to support hospitals, as hospitals have been self-financing. Therefore, once weaning occurs, there must be a compensatory mechanism in place.
To hold down prices or prevent medical equipment price inflation, the system needs standardization and policy matching improvements. In the middle of the circulation of medical devices, having just one or two intermediaries is enough—not only ensuring the interests of middlemen but also facilitating government department monitoring.
(From Contemporary Medicine Group, 2006.02-03I81)