China: Imported Drugs Are Costly, But Widely Used

In China, the average cost of hospital inpatient care in 1992 was $88.90, of which 55%-65% was due to drug costs, reports China MediPharm Insights. Income from drug sales has become Chinese hospitals' main source of finance.

Prices of imported drugs are six to seven times higher than those of domestic origin, and sometimes several dozen times higher, it says. Prices of Chinese drugs are strictly controlled but those of imports or drugs produced by joint ventures are not. In 1985, spending on imports was $77.64 million, rising to $395.27 million in 1990 and $716.32 million in 1994. Imports now constitute 22% of the market, and if smuggled drugs were included, the statistics would be astounding, says the report.

Foreign drugs are popular because of China's free health care system, which covers 70%-80% of patients, plus manufacturers' discounts. Drug sales are determined by doctors, and it is no secret that some prescribe for "commissions," or discounts, which have grown from 3%-5% in the 1980s to at least 15% now, or up to 30% for imports. The Ministry of Finance says that in 1994, discounts in 80,000 hospitals cost $554 million, while the Office of Drug Administrative Protection (SPAC) says they cost it at least $700 million every year. Spurred on by these benefits, doctors prescribe expensive imports and "complex prescriptions."