(2003; 30 pages) [French] [Spanish]
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.