Cost-Containment Mechanisms for Essential Medicines, Including Antiretrovirals, in China - Health Economics and Drugs Series No. 013
(2003; 30 pages) [French] [Spanish] View the PDF document
Table of Contents
View the documentAcknowledgements
View the documentTerms of reference
Close this folderIntroduction
View the documentCost-effective medicine selection
View the documentPrice information
View the documentInternational open tendering
View the documentVoluntary discount agreements
View the documentVoluntary licensing
View the documentCompulsory licensing
View the documentLocal state production
View the documentGovernment price controls
View the documentReduction of import and other taxes for essential medicines, and rational dispensing practices
View the documentPublic investment in R & D for new medicines: A mid- to long-term strategy
View the documentBackground and experiences with voluntary agreements
View the documentCountry rights to be protected in voluntary agreements for reduction of prices of medicines
Open this folder and view contentsCompulsory licensing - practical aspects and procedures
View the documentConcluding comments
View the documentList of persons contacted
View the documentFurther reading

Reduction of import and other taxes for essential medicines, and rational dispensing practices

Reducing import and other taxes on pharmaceuticals may serve to lower final prices to consumers. Where there is competition, such taxes will clearly add to the final price of a product, an add-on to the wholesale price. Where patent protections are in place, patent holders have much more pricing discretion, and may set wholesale prices with an eye to the final retail price. Thus tax reductions may not translate into reduced retail prices, or price reductions equivalent to the tax reduction. Whether tax reductions thus benefit consumers will turn in significant part on the particularities of specific markets: whether products are patented, whether price controls are in place, how patent holders choose to act and pricing discretion available to pharmacies and dispensing agencies.

Pharmaceutical dispensaries may engage in significant price mark-ups, or unscientific dispensing practices that favour use of brand-name and higher-cost products at the expense of generics and lower-cost alternatives. As is the case in many countries, China may consider regulations to require or prefer generic substitution, where safe and effective generics exist. Many price-increasing and unscientific dispensing practices relate to the percentage mark-up by dispensaries. To realign dispensary incentives, China may consider regulations stipulating that pharmacies charge a flat fee per sale, as opposed to a percentage of sales.

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