Key takeaways of China's new policy reform on drug manufacturing and distribution

At the end of 2016, there were some 6,802 drug manufacturing companies registered in China, making China the biggest manufacturer of preparations and the largest manufacturer and exporter of active pharmaceutical ingredients in the world. 

This apparently impressive statistic belies a more worrying reality: 97% of the drugs manufactured in China are generic drugs.  In the drug distribution sector, the top three drug wholesalers have a combined market share of 33% - significantly less than the average ratio in developed countries, reflecting the dispersed and fragmented nature of the sector.  Furthermore, although the Chinese authorities have made substantial efforts to clean up the market, issues like low drug quality, chaotic drug distribution, high drug prices and commercial bribery are still prevalent in the drug distribution sector.

It was against this backdrop that the State Council of China issued the Further Reforming and Enhancement of Policies regarding Drug Manufacturing, Distribution and Usage Several Opinions (the "2017 Opinions") on January 24, 2017. 

The 2017 Opinions set the stage for the introduction of rules and policies designed to strengthen the Chinese drug market, especially to improve the quality of drugs, lower drug prices and facilitate the usage of drugs by ordinary consumers.  However, rather than actually putting forward substantive new policies, the 2017 Opinions mainly summarize and revisit certain key policies introduced in the past two years.  That said, there are still some key takeaways that merit particular attention.


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