(Yicai Global) Feb. 21 -- Centralized medical tenders organized by alliances made up of provincial-level bodies are becoming increasingly active in China.

This is a new trend in the bulk-buying of medicines and high-value medical consumables by public hospitals, in addition to holding centralized procurement in which related bodies from across the 31 provincial-level areas take part.

As many as 17 inter-provincial centralized tender alliances have been formed across the country, Yicai Global learned from Emed.cc, a Chinese medical bid information site, and information from local governments.

One such grouping, led by a Guangdong provincial body, set a record by procuring 276 kinds of medicines in a single bulk-buy tender. Another alliance, led by a body in Hubei province, set a record with members from 19 provincial-level areas.

Bulk-buy tenders organized by inter-provincial groupings can boost their bargaining power, Chen Hao, director at the Center for Drug Policy and Management Research at the Tongji Medical College of Huazhong University of Science & Technology, told Yicai Global. Such tenders can also help prevent the risk of relevant officials accepting bribes, he said.

The increasing variety of procurement by inter-provincial alliances is set to become a mainstream trend, Chen Jinfu, deputy director general of the National Healthcare Security Administration, said at a press conference earlier this month.

He said that if the tenders of these inter-provincial alliances are successful, government agencies in non-member provincial-level areas may follow suit and hold centralized tenders based on the prices determined by the alliances.

And, as long as the purpose of selection is achieved, it will not be a must necessarily to organize national-level centralized tenders, Chen noted.

“I recommend fine-tuned procurement packages by area and variety instead of a monopolistic bundled package,” he said. This can not only ensure supply of drugs for medical and health institutions in a region but also balance the three goals of price reduction, drug quality and meeting local clinical needs, Chen added.

Justifying Cuts

Government agencies should also actively promote the establishment of a drug cost investigation mechanism to scientifically calculate drug transaction prices based on production and transaction costs to ‘justify the price reduction,’ he continued.

Some experts believe that a fault tolerance, trial and error and error correction mechanism should be set up to provide the inter-provincial tie-ups with a stable and effective operation guarantee. This is to ensure that “the excessively low or high price of individual drugs will not affect the overall situation,” Liang Jialin, secretary general of the value-based health care advisory expert committee, told Yicai Global.

In the next phase, chemical medicine, Chinese patent medicine and biomedicine will be the three areas where the bulk-buy program will be conducted in an all-around manner, Yicai Global learned. High-value medical consumables, meanwhile, will focus on orthopedic consumables, drug balloons, dental implants and other pricey products.

The NHSA’s Chen told reporters earlier this month that the reform of centralized procurement of medical supplies has entered a new stage of normalization and institutionalization.

In the three years since the reform was launched, centralized procurements involving bodies in the 31 provincial-level areas alone have saved a total of more than CNY260 billion (USD 41.1 billion) for medical institutions and consumers, he noted.

Editors: Tang Shihua, Peter Thomas