4 WINTER 2024 NO.89 / THOUGHT LEADERSHIP BRIEF Read all HKUST IEMS Thought Leadership Briefs at http://iems.ust.hk/tlb T: (852) 3469 2215 E: iems@ust.hk W: http://iems.ust.hk A: Lo Ka Chung Building, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon With Support from Alex Jingwei He is Associate Professor of the Division of Public Policy at The Hong Kong University of Science and Technology where he also serves as the Acting Director of Institute for Public Policy and Co-Director of the Master of Public Policy Program. He specializes in health policy and governance, social welfare reforms, and policy innovation. He has been ranked as the world’s top 2% most cited policy scientists since 2021 (‘the Stanford ranking’). Mengjie Long is a research assistant in the Division of Public Policy at The Hong Kong University of Science and Technology (HKUST). She holds a Master of Public Policy degree from HKUST and earned her bachelor’s degree in public administration from Renmin University of China. CONCLUSION Cost containment has become a key policy priority for the NHSA. These measures have not only earned public recognition but have also increased accessibility to medicine. However, this strict regulatory environment has reduced profit margins for the pharmaceutical industry. Losing a bid under centralized procurement can create far-reaching consequences for pharmaceutical companies. Losses in this market would force them to rely on alternative markets or private sector sales, which would still not compensate for the loss of public sector volume. Companies’ market share and competitive standing in the industry are at stake. This profit decrease may deter them from investing in research and development, particularly innovative drugs. There are, therefore, increasing concerns regarding the potential innovationstifling effects and long-term industry growth. The “winner takes all” logic of volume-based procurement may inadvertently lead to market monopolization. Public skepticism is also about the efficacy and safety of low-price generic drugs. The Chinese health financing system is heavily reliant on social health insurance. However, rapid population aging and economic downtown are mounting financial pressure on its health insurance programs. Despite the increased financial accessibility of patented drugs, their clinical use still faces considerable hurdles due to stringent reimbursement conditions set by social health insurance agencies. As a result, hospitals are often reluctant to introduce these drugs into clinical use, thus limiting the policy’s intended benefits to patients.
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