“Serious Disease Insurance” and “VAT Reduction” are More Important than “Zero Tariff”

In Premier Li’s meeting the press recently after close of the two sessions, he said, "We will largely reduce the import tariff of oncology drugs that are badly needed by the people and patients and strive to achieve zero tariff". This news has aroused wide attention. I’d like to give China thumbs up for it.

 "Zero tariff" has thus taken an important step forward, however, in my opinion, "zero tariff" still offers little help to oncology patients and patients with special and serious diseases, and is difficult to truly reduce the burden of oncology patients. It is crucial that the "serious disease insurance" and "pharmaceutical product VAT reduction" be improved ASAP.

I. The ultimate mission of pharmaceutical products is to safeguard health

China has constantly intensified the reform in the pharmaceutical field in recent years, and achieved significant results in links like pharmaceutical product regulation and review. It focuses on the pharmaceutical product quality and controls the pharmaceutical product price. In fact, the formation of the pharmaceutical product price relates to manufacturers, circulation link, hospitals, and taxes, etc.

Here we only talk about the tax relating to pharmaceutical products. As China comprehensively implements value-added tax in lieu of business tax, the Interim Regulation on Value Added Tax (2017 Revision, Order No. 691 of the State Council of China) specifies as follows on pharmaceutical products: except contraceptives, generally 17% VAT is levied for pharmaceutical products; 5-8% tariff is levied on imported pharmaceutical products. The pharmaceutical product circulation is especially complex in China, without effective process management measures, which leaves the maneuverability. There are always patients paying no matter how the pharmaceutical product prices become.

II. "Serious disease insurance" and "pharmaceutical product VAT reduction" shall be improved

There is nothing to be said against taxation. The World Health Organization also points out that: in terms of taxing pharmaceutical products, governments should tax the things that make people ill, not the things that make them well.

Source: Internet

There are such data: 1. The public medical and health expenditure accounts for about 7% of the GDP in European countries, while the figure is about 3.3% in China; 2. In terms of VAT levy, the average VAT rate is 8.8% in Europe, wherein, only a few countries implement low tax rate for pharmaceutical products; the VAT is 0 in the U.S. and Australia, and is 10% on pharmaceutical products in South Korea.

Regarding the above, we should know that there are many factors constituting the pharmaceutical product price, especially in China, therefore, it is very important to strengthen the overall industrial upgrading, and improve regulation and review for pharmaceutical products, however, the process management on pharmaceutical products should also be strengthened, and pharmaceutical product circulation regulation mechanism should be gradually improved; finally, what is the most important is that China should continue to increase the degree of support, and reduce VAT on the one hand, especially for pharmaceutical products that are badly needed and cause large burden; China should develop a perfect "serious disease insurance" policy and effectively include oncology drugs, etc. in the medical insurance, on the other hand.

After all, pharmaceutical products are unlike general merchandise. Their ultimate mission is to safeguard health.

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