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the price of medicine should be a "chess game" rather than a "one-size-fits-all" approach. what matters to medical insurance should be left to medical insurance, and what matters to the market should be left to the market.

written by ai chuan

after a summer of soaring vegetable prices, pork prices have also hit new annual highs, with the year-to-date increase exceeding 30%. in addition to these high-frequency and rigidly needed consumer goods, another less-noticed commodity, medicines, is also secretly raising prices.

recently, many people have complained on social media that many daily medicines they often buy have increased in price to varying degrees on online platforms, involving multiple categories such as allergy medicines, cold medicines, and anti-inflammatory drugs.

picture/internet

who is behind this price increase? what is the reason behind it?

according to caixin weekly, in the past two months, many pharmaceutical companies have sent price maintenance letters to e-commerce platforms and pharmacies with online sales. "it is no exaggeration to say that the price maintenance letters received on the desk recently are like piles of snowflakes," said a pharmacy industry insider.

the so-calledprice maintenance is also a new business. there will be special intermediary companies that send letters on behalf of pharmaceutical companies to "raise" prices and even find relevant departments to complain.

as an important means to consolidate the existing profit chain, the "price maintenance" behavior of pharmaceutical companies requiring sales terminals to adjust prices is not new. according to media reports, from 2015 to 2017 alone, there were hundreds of price maintenances on major pharmaceutical e-commerce platforms, involving 521 product specifications and 121 pharmaceutical companies.

in other words,it’s not the food delivery or e-commerce platforms that are raising prices, but the pharmaceutical companies that are getting anxious.

the owner of a drugstore in changsha told the reporter of the daily economic news that "selling drugs cheaply has caused trouble, and i never expected that some upstream manufacturers and commercial companies would send 'warnings' or even directly cut off supply."

since the large-scale implementation of the drug procurement policy, coupled with the fact that e-commerce platforms have been increasing their investment in the health sector, the mentality of "buying medicine via takeout saves money" has become increasingly mature. in recent years, the public has become accustomed to checking online platforms before seeing a doctor or buying medicine. now, they are suddenly faced with price increases, and are somewhat caught off guard.

what exactly happened?

01

the duck knows first when the river water warms in spring. the policy direction is the most fundamental reason why upstream pharmaceutical players once again take up the weapon of "maintaining prices".

in june this year, the national healthcare security administration issued a letter on launching a special campaign of “going online to shop, checking drug prices, comparing data, and enforcing governance”.

the letter pointed out that using the "instant delivery price" of online drug sales platforms as an anchor point, the drug prices in various channels, such as the prices listed on the provincial centralized procurement platform, the selected prices in centralized volume procurement, and the drug prices in designated retail pharmacies, would be compared with the "instant delivery price" of online drug sales platforms. if abnormally high prices were found, pharmaceutical companies would be urged to take the initiative to adjust.

this means,the prices of drugs on online platforms such as food delivery will become a reference for drug price "governance".

soon after, the "price comparison tool" was gradually implemented in many provinces and cities. according to media statistics, as of august 2024, medical insurance in nine provinces including guangdong, shaanxi, inner mongolia, hainan, and fujian, as well as medical insurance in 18 cities including shenzhen, dalian, shenyang, xuzhou, and jingzhou all support drug price comparison on mobile phones, and the advancement speed is considerable.

for ordinary consumers,using price comparison to promote price reduction is of course a good thing. many people are waiting for a new round of regulation of pharmacies.

picture/internet

but what the public did not expect was that the offline channels did not reduce prices, but the online channels increased prices.

from the perspective of pharmaceutical companies, the logic is self-consistent.since it is a price comparison and since "online and offline prices are unified", it does not necessarily mean that prices must be lowered offline. prices can also be raised online. if they are raised, won't the prices be unified?

the reason is that public hospitals, which account for more than 60% of the prescription drug market, are still the "main battlefield" for most pharmaceutical companies. data show that in 2023, my country's total drug sales will reach 1,886.5 billion yuan, of which public hospital terminals account for 61.3%.

to ensure that the “plate” within the medical insurance is not damaged,instead of lowering drug prices in pharmacies or hospitals, pharmaceutical companies should directly raise drug prices on e-commerce platforms.

in order to force online channels to comply, pharmaceutical companies have recently sent price maintenance letters to pharmacies with online sales businesses. if they encounter boycotts, pharmaceutical companies will not hesitate to send "warnings" to remove drugs from the shelves or even directly cut off supply.

judging from the purpose of the letter sent by the medical insurance bureau, the response of pharmaceutical companies is obviously contrary to the original intention of the medical insurance bureau's policy to reduce fees, and it also harms the accessibility of medicines to the people.

why do they do this when they know it is not possible? we need to further understand the ins and outs of the formation of the drug pricing system.

02

pharmaceutical companies should have weighed the pros and cons of this drug price increase.

at first glance,the pharmaceutical companies made a very careful calculation. they not only "responded" to the price comparison letter from the medical insurance bureau, but also maintained their market share in offline channels and raised prices online.

but if you look closely, you can still find irrational factors behind the price increase.

as the public opinion said, this price increase is a "stress price increase." what is stress? not thinking it through is stress, and overreacting is also stress.

pharmaceutical companies don't need to be overly nervous.

first,in-hospital medical insurance drugs, especially collectively purchased drugs, are the focus of the national medical insurance administration's price comparison this time.in the letter, the national healthcare security administration made it clear that the focus of addressing unreasonable high prices is "those involving payment from medical insurance funds."

the reason is very simple. the medical insurance bureau is concerned about the overall medical insurance fund. if offline channels sell collectively purchased drugs too expensively, it will obviously hinder the "money-saving plan."

the national healthcare security administration has previously signaled many times that it wants to squeeze out the water in prices. its determination can be seen from actions such as anti-corruption in the pharmaceutical industry, "four-same drug management," and talks with yixintang.

looking back, a considerable portion of the medicines sold through online retail channels outside the hospital are over-the-counter drugs, which have greater pricing freedom. the medical insurance bureau may not have the leisure to take care of everything personally, so why are pharmaceutical companies so nervous?

pharmaceutical companies, don’t get nervous and sweat when you hear about price comparisons, and then act erratically.

photo/vcg

second, in the price comparison letter from the medical insurance bureau,"significantly higher than" and "significantly higher than" are a group of high-frequency words that appear repeatedly, which shows that the policy has a certain degree of tolerance for price differences within a reasonable range and the normal operation of the market mechanism.

taking the hunan provincial medical insurance bureau as an example, the province previously issued a notice on drug price linkage, which clearly implemented quantitative control over the price difference of listed drugs. the price difference of western medicine (chemical drugs and biological drugs) was controlled within 1.8 times, and that of traditional chinese medicine was controlled within 3 times.

the so-called "unified prices at multiple ends" is a misunderstanding of the policy by pharmaceutical companies, and it is not even ruled out that it is an excuse to raise prices. however, the one-size-fits-all approach is definitely not the original caliber of the medical insurance bureau, nor is it its original intention.

so, what do pharmaceutical companies really need to be nervous about?

03

some time ago, the economic daily published a meaningful comment:

the "one game" of drug prices does not mean "one size fits all" or "one price". unlike the national centralized procurement prices implemented by public hospitals, retail prices are more derived from free market competition. pharmacies enjoy the right to set prices independently within the scope of supervision. considering the logistics costs, supply and demand, raw material costs and changes in the intermediate links, "price differences" within a reasonable range are normal. therefore, strict supervision of drug prices is not simply to equate online and offline drug prices. if the price comparison policy is implemented "one size fits all", it may lead to "high prices both online and offline", which will change the taste of the people-friendly policy.

it can be seen that both the regulatory authorities and mainstream public opinion are concerned about "unreasonably high prices" rather than the so-called "one size fits all" and "one price".

a one-size-fits-all approach does not conform to the general direction of china's medical reform.

nearly ten years ago, on june 1, 2015, the "opinions on promoting drug price reform" was promulgated, which meant that, except for drugs in the medical insurance catalogue, government pricing for most drugs was abolished, and the actual transaction price of drugs was mainly determined by market competition.

now the question is,"prices are formed by market competition" is actually too broad a concept.

taking the price of buying medicine online as an example, considering the rent, logistics costs, supply and demand, raw material costs and changes in the intermediate links, the price of medicines in different stores on the same platform will of course be different; even in the same pharmacy, the price of the same medicine will be adjusted continuously within a year, and sometimes the discount may be very large during shopping festivals.

therefore, "the lowest online drug price" is an overly vague concept and should not be the "anchor point" for price comparison.

but this is the real market. as long as the market mechanism exists, reasonable drug price differences will continue to exist.

at the same time,low price should not be the only criterion.

picture/tuchong creative

for example, there was a very popular news not long ago: a parent in zhejiang found that when he took his child to see a doctor, the local hospital could only use a domestic azithromycin instead of the imported original drug. after two days of intravenous drip, the child still had a high fever. it was not until he was transferred to another hospital and switched to an injection of the imported original drug, pfizer's zithromax, that the fever subsided. the father asked: why did the imported drug that was previously available disappear?

the public is very worried that price will become the only criterion for centralized drug procurement, to the extent that some imported original drugs that may be more effective will be excluded from public hospitals.

the same principle applies to the “online-offline” drug price difference. price is important, but it is not the only important thing.

when it comes to drug prices, especially those outside the medical insurance catalogue, the most important thing is not “price reduction” but “transparency”.

the so-called price comparison is exactly what is meant by transparent drug prices. in this regard, it must be said that online drug purchase platforms such as food delivery and e-commerce have a natural advantage.

only with transparency can the market mechanism play a better role and drug prices return to a reasonable range.

as the saying goes, leave medical insurance to medical insurance and leave the market to the market.

04

some voices saying that "buying medicine online has become more expensive" undoubtedly mean that the platform has become an accidental victim of this drug price increase storm.

for pharmaceutical companies and drugstores, medical e-commerce may mean a "price breaker". their attitude is the same as that of many physical stores towards e-commerce. they may even blame the common problems in the industry on the emergence of medical e-commerce.

this kind of emotion is of course normal. who doesn’t want to make money without doing anything, especially excess profits?

the pharmacies are even more conflicted.

frankly speaking, offline pharmacies, even large chain pharmacies, have not been doing well in recent years.

data shows that the expansion momentum of chain pharmacies is still continuing, but their revenue growth rate and net profit growth rate are beginning to show a turning point.

in the eyes of some people, the blame lies with the online platform again.

is this really the case?

as of the end of 2023, the number of pharmacies nationwide has reached 667,000, more than 200,000 more than milk tea shops.

do we really need so many pharmacies?data shows that china is one of the few pharmaceutical retail markets in the world where a single pharmacy serves less than 2,000 people, and the average number of people served per store is only 40% of that in developed countries.

the more you open, the more you lose. blind expansion has led to this situation.

photo/vcg

some drugstore chains have found that instead of simply passing the buck, it is better to actively embrace the internet.

looking at the 2024 interim reports of a number of chain drugstores, although the data is not good, digital transformation is the unanimous direction chosen by all companies. the high growth rate of instant retail channels has become a rare bright spot in this cold winter for drugstores.

pharmacies understand the principle of "dual online and offline main venues", but pharmaceutical companies have not yet understood it, or are pretending not to understand.

when the scale effect of chain drugstores fails, the incremental market of pharmaceutical companies is actually placed on the online market. in this sense, when it comes to digital transformation, the interests of pharmaceutical companies, physical drugstores, and online platforms are converging.

in the face of common interests, being upset is just being upset.

the market will eventually resolve unnecessary disputes.