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The path to a healthier China

By Erik Nilsson (China Daily)
Updated: 2007-03-07 07:16

Clearly defining the roles of the public and private sectors is crucial to China's healthcare reform.

The lines are not yet clearly drawn, and many healthcare companies say that this ambiguity is giving investors the jitters about entering the market.

And when drawing the lines, it is important to ensure that the private and public sectors strike a mutually supportive balance that capitalizes on each sector's respective proficiencies.

It is the government's responsibility to ensure that Chinese people have access to safe, high-quality services, and this classic duty of the government cannot be contracted out.

The market, however, can become a useful tool for ensuring that healthcare in China adheres to international standards. And market competition can produce innovation, although competition should not run unchecked. As of late 2006, there were more than 5,000 pharmaceutical companies and 2,000 distributors operating in China; that might be a few too many.

While the market can play a role in China's healthcare reform, it is important that the government closely regulates the private sector in certain areas.

Hospitals, for example, should never come under the ownership of pharmaceutical companies, because, as the World Health Organization's representative in China Henk Bekedam points out, there is a conflict of interest between the two, particularly in the prescription of drugs.

And the pricing of drugs is one of the most important areas where the government must regulate the market. Out of the 5.6 percent of its GDP China spent on healthcare in 2004, an incredible 44 percent of total health expenditure was on drugs. The top range for developing countries was about 25 percent, while Europe was at 15 percent.

According to the WHO, China currently spends less than 1 percent of its GDP from the government side to provide essential services, while overall expenditures mostly coming from people's pockets and insurance are 6 percent. Estimates jointly calculated by the WHO and Ministry of Health say that it would cost China and additional 1 percent of its GDP to provide universal access to essential healthcare services.

But before the government can move forward in providing these services, it must carefully decide and clearly define the role of the public and private sectors in order to provide the best healthcare for its people.

(China Daily 03/07/2007 page7)