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China's government overhaul seen to streamline healthcare system

China's plans to overhaul its government structure at the central level is expected to make its healthcare system more efficient, said Justin Wang, a managing director and partner at L.E.K. Consulting, a global management consulting firm.

In a major reshuffle of regulatory power, the government will retire the China Food and Drug Administration and set up a new National Market Supervision Administration instead, the State Council said during the National People's Congress on March 13.

Under the government's proposal, the National Market Supervision Administration will consolidate the market monitoring responsibilities of the CFDA, the Administration for Industry and Commerce, and the Administration of Quality Supervision, Inspection and Quarantine.

According to Wang, this restructuring makes sense because at the local level, regulatory activities were carried out by one team.

"If you look at local practice, especially in counties, the CFDA is already merged with the other two. In many counties you don't have a separate FDA [authority]," Wang said.

This was a problem because at the central level there were three different departments, but at many local counties there was only one, so there was an inefficiency there, he added.

The integration of the three agencies should improve the way the government can monitor the market, Wang said.

"The idea of merging them at the central level is basically to make sure everything is aligned in a more efficient way."

Recognizing the unique nature of drug monitoring, the government said it will set up a separate National Drug Administration, which will become an agency under the new supervisory body as a second-tier department.

The National Market Supervision Administration itself will be a direct agency under the State Council.

National medical insurance programs to consolidate

Under the restructuring proposal, the government will also establish a new National Medical Insurance Bureau to oversee the country's public health insurance schemes, a departure from the old system in which the urban and rural medical insurance programs were managed separately by the different agencies.

Previously, the Ministry of Human Resources and Social Security, or MOHRSS, managed the country's two urban medical insurance schemes as well as the rural insurance scheme since the second half of 2013. Prior to that, the National Health and Family Planning Commission, dubbed NHFPC, managed the rural program.

Operations of the insurance programs were also mired because the NHFPC had been in charge of China's drug selection and tendering process for hospitals, while the MOHRSS acted as the payer for the former's purchasing decisions.

According to Wang, forming a national medical insurance bureau that is now independent of the MOHRSS and the NHFPC is a very positive development.

The move "puts the procurement and tendering responsibilities to this [new national] bureau, so that the payer is now the buyer," he said.

"It is going to make procurement much more efficient because [the new bureau] is the ultimate payer. They have the money," Wang said.

As part of the State Council's plan, the government will also set up a new National Health Commission to implement national health policies, which includes advancing the reform of the healthcare system.

This new entity effectively replaces the NHFPC, integrating its responsibilities with those from a number of other agencies, including the State Council Healthcare Reform Committee, National Committee on Aging, and the Ministry of Industry and Information Technology.

The proposal is expected to be approved by the end of the congress.