CHINA Law and Practice Contributed by: Alan Zhou, Coco Fan, Kelly Cao, Stephanie Wang and Rae Zhang, Global Law Office
7.4 Non-Tariff Regulations and Restrictions Imposed Upon Imports The importation of drugs or medical devices is subject to registrations/permits, compulsory national or indus- trial standards and specific regulations. To guarantee the public’s safe use of pharmaceuticals and medi- cal devices, the laws and regulations specify several reasons for prohibiting importation, including but not limited to:
procurement, and may set pricing rules for manu- facturers and wholesalers; • the “two-invoice system” eliminates multi-tiered distribution channels and lowers drug prices; and • the enforcement of a “zero mark-up policy” means that public hospitals may not add any mark-up when selling drugs to patients. Medical Devices There is no nationwide regulation or policy specifi- cally and directly controlling the pricing of all medical devices. However, the pricing of medical devices may be significantly influenced by the following regulatory factors: • the pricing of certain medical devices is indirectly restricted because national and local rules limit the amount that a public hospital may charge patients for medical services, and the cost of medical devices used in these services may be included in those charges; • the procurement of certain costly medical devices by hospitals is strictly controlled by planning at the central and provincial levels; and • centralised procurement, the “two-invoice system” and the “zero mark-up policy” may also be applied to the procurement of certain high-value medical consumables by public hospitals, etc. The NHSA has strengthened its regulatory framework governing pharmaceutical pricing through the imple- mentation of the Medical Products Price and Procure- ment Credit System since 2020. By introducing a list of dishonest behaviours, the provincial procurement authorities impose contractual measures on non- compliant enterprises, including the restriction or ter- mination of their qualifications in listing transactions. Enterprises classified as non-compliant may, however, rectify their credit through remedial actions, and price adjustments is one of the key measures to be taken. This system has been progressively strengthened in recent years, with oversight becoming increasingly stringent. 8.2 Price Levels of Pharmaceuticals or Medical Devices PRC law does not require the prices of pharmaceu- ticals and medical devices to be benchmarked or
• uncertain curative effect; • serious adverse reaction; • harm to the human body; • expired; • invalid; • obsolete; or • used.
7.5 Trade Blocs and Free Trade Agreements China implements the strategy of upgrading free trade areas and has signed 24 free trade agreements (FTAs) with 31 countries and regions across Asia, Oceania, Latin America, Africa and Europe. 8. Pharmaceutical and Medical Device Pricing and Reimbursement 8.1 Price Control for Pharmaceuticals and The prices of most drugs are mainly determined by market competition, while the prices for narcotic drugs and Class I psychotropic drugs that are listed in the Central Pricing Catalogue are capped by the government. Nonetheless, government policies may have a significant effect on the pricing of drugs – for example: • prices for drugs reimbursed by the BMI funds are determined by authorities, including the NHSA, and prices for certain drugs covered by the BMI funds are fixed through negotiations between the NHSA and suppliers thereof; • the government centralised procurement, which offers strong bargaining power to the procuring side, gives a favourable procurement price to hos- pitals and drug stores participating in centralised Medical Devices Pharmaceuticals
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