“Two Invoice System” ——

The report

On January 11, 2017, the State Council Healthcare Reform Office, the National Health and Family Planning Commission of the People’s Republic of China, the FDA as well as another six ministries and commissions issued the so-called GYGBF [2016] No.4, the Notice on the Distribution of the Opinions on the Implementation of the “Two-invoice System” in Drug Procurement by Public Medical Institutions (for Trial Implementation). The purpose has been to establish detailed implementing rules for the policy according to local conditions and to create quick reports to the Medical Reform Office of the State Council.

As a professional third-party institution, Deloitte – with its long-lasting track record in providing expert advisory services in risk, strategy and tax to customers from the Life Sciences and Healthcare industry – uses its leading methodology to offer customers a detailed analysis of the new policy. The purpose of this article is to show the background of the new policy, features of industries affected and measures to encounter these changes.

Viewpoints / key findings

With the accelerating growth of the demand in the China medical and pharmaceutical market and the basic medical insurance system's continuous progression, China's healthcare expenditure is encountering fast expanding pressure. China's healthcare industrial policy is gradually transferring its orientation to lead the industry to grow reasonably and control healthcare expenditures. Besides utilizing the centralized procurement and medical insurance expense control mechanisms to control medicine prices, the government is also making efforts to implement the "Two-invoice System" in the distribution channels in order to reduce the length of the supply chain thus medicine prices.

Deloitte believes that the "Two-invoice System" will impact all segments in the healthcare industry value chain, to various extends. It can be expected that all levels of governments will make full efforts to implement the "Two-invoice System", and strengthen the monitoring over the market in order to meet the two-invoice system's requirements in the short-term. Companies which cannot meet the two-invoice system's requirements will be squeezed out from the market. Therefore, companies need to improve their internal operation quality, with deep understanding of the companies themselves as well as the policies' substance, in order to cope with this change.

Specifically, the report examines in following aspects:

• Policy Background: Policy History, Recent Provincial Development
• Impact Analysis : Pharmaceutical Industry, Medical Instruments, Formula Food for Special Medical Use
• Suggested Strategies: Internal Operations Diagnostics, Update the Distribution Management Model, Optimization of Internal Tax Planning and Financial Strategy