China sees steady rise in healthcare costs

SUMMARY: China's total healthcare spending could rise in the next few years, fueled by a rise in chronic diseases such as lung cancer, stroke, heart disease and diabetes.
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NEW YORK (Reuters) - China's efforts to overhaul the world's biggest healthcare system and the increased medical care demanded by a more prosperous and aging nation will push costs higher, according to Health Minister Chen Zhu.

In an interview with Reuters during a trip to New York this week, Chen said China's total healthcare spending could rise from 5 percent of GDP to "maybe 6 to 7 percent" in the next few years.

That spending has been fueled by efforts to extend health coverage to all of China's 1.3 billion people and by a rise in chronic diseases such as lung cancer, stroke, heart disease and diabetes.

In July, the World Bank warned that China could see an economic slowdown if it does not take rapid action to improve the health of its population.

But China has seen the dangers of allowing unchecked medical spending, Chen said. "We have learned lessons from some of the more developed countries" that spend more than 10 percent of GDP on healthcare, he said (the United States spends about 17 percent). China is therefore taking significant steps to control costs while improving care.

Among them: increasing the number of medications on the "essential drugs list" to about 800 from 307. Prices of drugs on the list are government-controlled and kept low as part of Beijing's efforts to reduce out-of-pocket costs for patients.

"This year we are going to issue a new version of the essential drugs list, including drugs for the prevention and control of major diseases, such as cancer," he said. "We will extend the list to include drugs used not just in primary healthcare institutions but in big hospitals," which means more specialty drugs, such as those for cancer and cardiovascular disease, will land on the list.

In another effort to control costs, drug procurement will occur at the provincial level rather than by individual hospitals, allowing the government to negotiate better prices.

China is also taking a page from Britain, whose National Institute for Health and Clinical Evidence (NICE) takes into account not only the benefits of particular medical tests or treatments in the guidelines it issues to physicians, but also their costs. The result of such "comparative-effectiveness analysis" is that some expensive interventions that do not improve patients' survival or quality of life as much as others are not covered by the government-run National Health Service.

"We should pay attention to the affordability of our (health)-insurance system," said Chen. "So now we are establishing a kind of NICE structure by using comparative-effectiveness analysis." China has signed an agreement with NICE to implement that.

Although China is still phasing in comparative-effectiveness analysis, one of its first targets might be expensive cancer therapies. "We have already studied the possibility of including some targeted therapies against cancer in our essential drugs list," Chen said.


Chen was in New York to receive the 7th Annual Szent-Györgyi Prize for Progress in Cancer Research from the National Foundation for Cancer Research, which was founded in 1973 to support cancer studies and education.

He shared the award with his mentor, Dr. Zhen-Yi Wang. Together, they pioneered a treatment for acute promyelocytic leukemia combining arsenic trioxide, a traditional Chinese medicine that has been used for some 2,400 years, with ATRA (all-trans retinoic acid), a chemotherapy drug sold by Roche Holding AG as Vesanoid.

The combination, now the standard of care, has increased the five-year survival rate of patients with APL to 95 percent from about 25 percent, with almost no recurrence.

After being sent to the countryside for "re-education" during the 1960s Cultural Revolution, Chen became a "barefoot doctor," using traditional Chinese medicines. Officials plucked him out of obscurity and sent him to university for medical training. He was appointed health minister in 2007 at age 54, only the second person who is not a Communist Party member to receive a cabinet post.

Chen said he moved quickly in promoting health reforms, starting in 2009. "The basic concept is to provide basic health services as a public good to all people," he said.

The country has made significant progress on that front. "Today, 96 percent of the Chinese people are covered by basic medical insurance, compared to 15 percent 10 years ago," Chen said. The infant mortality rate has fallen to 12 per thousand from 15 per thousand in three years, and the rate of women dying in childbirth has fallen to 26 per 10,000 from 34.

Among China's greatest challenges are addressing the coming tsunami of chronic diseases such as cancer and cardiovascular illness, which become more prevalent as life expectancy increases and living standards improve.

To reduce smoking, Chen said, the government was pushing for higher taxes on tobacco products, particularly lower-cost brands popular with teenagers.

Beijing is also welcoming foreign healthcare providers to set up shop in China. "Some people are not satisfied with the services provided in government-run hospitals and would like higher quality" care, Chen said.

China may have already surpassed the United States in one aspect of healthcare management. "More than 50 percent of the population" is now covered by electronic health records, Chen said. By comparison, only 34 percent of U.S. outpatient visits are with doctors who use EHRs, said Ashish Jha of Harvard School of Public Health.

Asked about China's HIV/AIDS population, Chen said the number of patients taking anti-viral drugs is on the rise. To meet the demand, he said, the country would rather see more joint ventures with global drugmakers to reduce the cost of imports.

"It has also been suggested by some people that we use compulsory licensing," or forcing patent-holders to allow manufacture of a drug in China, Chen said. "I believe we should be prudent in doing this. Only when there is a major public health crisis, then we can consider this type of possibility like we did several years ago during the SARS outbreak or the H1N1 pandemic, when Tamiflu was made in China" after negotiations with Roche.

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