McDermott Will & Emery has a strategic alliance with MWE China Law Offices, a separate law firm based in Shanghai. This China Law Alert was authored by MWE China Law Offices lawyer Henry (Litong) Chen.

The General Office of the State Council of China recently released Guiding Opinions that aim to minimise distribution intermediaries and costs in order to reduce the price of essential drugs at grass-roots medical institutions. It remains to be seen how the central procurement system will be implemented.

On 19 November 2010, the General Office of the State Council of China issued the Guiding Opinions on Establishing and Regulating Procurement Mechanism of Essential Drugs at Government-Funded Grass-Root Medical Institutions (Guiding Opinions), which aim to minimise distribution intermediaries and costs in order to reduce the price of essential drugs at grass-roots medical institutions and thus make medicines affordable. Essential drugs are those drugs available to the public at all times in adequate amounts and in appropriate dosage forms, at a price the public can afford.

The following example explains why the Guiding Opinions are important: it was disclosed recently that a box of aloe pills at an out-of-factory price of RMB 15.5 was sold to patients at RMB 213 (a 1,300 per cent increase to the original price). Many intermediaries played a role in raising the price.

The Guiding Opinions provide for the following points...