China's Drug Centralized Procurement: Policy Choices to Maximize National Life Expectancy with Limited Resources

Under the current conditions of limited resources, from the perspective of maximizing national life expectancy, some policies that may seem detrimental to industrial development are, in fact, reasonable. Recently, the "soul-cutting" approach of centralized drug procurement has sparked controversy. In discussions, while some criticize drug procurement, it is also necessary to examine this issue from different angles.

An expert in medical industry investment pointed out that China's innovative drug industry faces financing difficulties, with many companies opting to sell their achievements to large overseas pharmaceutical companies after achieving milestone results. For example, in June 2024, AbbVie obtained global exclusive licensing rights for an innovative drug from Mingji Biotech for a $150 million upfront payment and potential milestone payments. In August of the same year, Yiming Oncology granted a U.S. company the development and commercialization rights for two in-development drugs outside Greater China for an upfront payment of $50 million and potential near-term payments.

According to a report by Economic Observer in August 2024, the transaction amount for licensing projects by Chinese pharmaceutical companies increased year-on-year from 2020 to 2023, reaching $7.891 billion, $15.676 billion, $31.151 billion, and $47.267 billion respectively. The upfront payments from 2021 to 2023 were $3.086 billion, $1.994 billion, and $5.045 billion (including domestic licensing fees). Data from PharmaCube indicates a significant change in the financing structure of Chinese innovative drugs, with upfront payments for BD (licensing) rising from 3% of total financing in 2020 to 38%.

This expert believes that the drug procurement policy undermines investor confidence in the innovative drug industry. The pharmaceutical industry is characterized by high investment and high risk, but if a drug is successfully developed, it can yield long-term high profits under patent protection. However, under the procurement policy, even if a drug is successfully developed, it cannot monopolize high-priced sales through patent rights, thereby failing to achieve expected high profits.

However, there are also viewpoints suggesting that U.S. innovative drug companies similarly sell milestone results to large pharmaceutical firms to reduce risks. After the peak of the COVID-19 pandemic, financing for U.S. innovative drugs also decreased from 2021 to 2023. Nevertheless, the procurement policy indeed affects investor confidence in the pharmaceutical industry.

Weibo influencer Yiluo expressed views on current pharmaceutical industry policies in the article titled "Breaking the Pharmaceutical Iron Curtain Across Eurasia." Recent healthcare policies, such as DRG/DIP payment reform, have also caused dissatisfaction among doctors. Criticism has emerged in the online public opinion space, arguing that this represents a social regression.

Whether a policy is viewed as "regressive" depends on one's position and perspective. Pharmaceutical companies and pharmaceutical industry investors naturally hope for higher profits, while hospitals and doctors wish to use the best drugs and the most advanced equipment without overly considering costs. Patients want to obtain the best drugs and equipment at the lowest cost. Meanwhile, the state and policymakers need to consider from a broader perspective, viewing the healthcare industry as an investment rather than a profit-driven industry, aimed at exchanging investment for the health and longevity of the population.

From the national perspective, the ultimate goal of the healthcare industry is to improve the health level and life expectancy of the population while reducing resource consumption and costs. Therefore, evaluating the healthcare industry should be based on input-output ratios rather than income and profits.

Comparative data on health expenditure and per capita life expectancy between different countries shows that the U.S. far exceeds other developed countries in health expenditure, yet its per capita life expectancy is significantly lower, even below that of China. In contrast, among countries with similar life expectancy, China has the lowest per capita health expenditure; among countries with similar health expenditure, it has the highest per capita life expectancy. Historical data also indicates that China's progress from 1995 to 2020 was significant, whereas the U.S. has seen slow growth in per capita life expectancy since 1980 while health expenditure has increased significantly.

In terms of the efficiency of health expenditure usage, China’s healthcare industry has been successful, while the U.S. has relatively failed. However, from the perspective of the pharmaceutical industry, China’s healthcare sector faces challenges, while the U.S. is relatively successful.

China's healthcare policy seeks to balance healthcare quality, cost, and efficiency, aiming to reduce costs while providing appropriate healthcare quality. Education and healthcare, as basic rights, should not be fully industrialized, but should prioritize serving the people. China's healthcare policies consistently prioritize improving national health and life expectancy over industrial development.

Despite limitations, is it possible for China's healthcare policies to promote rapid industrial development while achieving sustained growth in per capita life expectancy with lower investment? Theoretically, it is possible, such as the "dual-track system" implemented in Singapore's real estate sector. In the healthcare industry, future potential solutions may include a dual-track system that allows wealthy individuals to access high-end healthcare while retaining opportunities for ordinary people to receive basic healthcare services. However, the uniqueness of the healthcare sector, characterized by the scarcity and mobility of medical resources, poses challenges to implementing a dual-track system.

In conclusion, current policies that seem to hinder the development of the healthcare industry are, in fact, reasonable measures seeking to maximize national life expectancy under conditions of limited resources. These policies may have their shortcomings, but they are not without purpose.