(Ji Jia Ge  No. 88, January 22, 2001)
To: Planning and Developments Authorities and Price Bureaus of Each Province, Autonomous Region, Municipal City and Planned City.
According to the guidance of the leaders of the State Council, the regulation of Work Rules for Pilot Projects Involving Collective Bid Procurement of Drugs by Medical Institutions that is jointly issued by five government departments including MOH and SDPC, and with the approval of the State Council, the following pricing issues for drugs purchased through collective bid procurement by medical institutions are hereby clarified so as to promote the smooth implementation of collective bid procurement of drugs:
1. The retail price of a drug set by relevant pricing administration authorities shall be the highest retail price. Medical institutions and retail drug stores may sell the drug at a lower price.
2. In procurement through collective bidding, medical institutions shall evaluate the price of a drug based on its quality using the ceiling retail price of the drug set by relevant price administration authorities and its actual market price as reference.
3. The margin resulting from the reduction in the purchase price to the hospital as a result of collective bidding (meaning the price difference equal to the ceiling retail price set by government or actual market price minus the winning bid price) shall be mainly transferred to patients, the reasonableness of the proportion of the transfer dependent on the enthusiasm with which the hospital engages in collective bidding. Provincial price administration authorities shall uniformly determine the proportion of the margin transferred to patients [and retained by the medical institutions] according to local situations. The retail price of a drug purchased through collective bid procurement shall be its winning bid price plus a certain margin, and shall only be valid within the relevant medical institution.
4. For a drug subject to government pricing, a local price administration authority shall determine and publicize the retail price of a drug winning the bid based on the pricing principles described above. For a drug subject to free market pricing, a medical institution shall determine and publicize the actual retail price of a drug winning the bid based on the pricing principles described above.
5. The organization which conducts collective bid procurement shall duly report the actual winning bid price of a drug to relevant drug administration authorities. A medical institution shall duly file with local drug administration authorities the actual retail price of the drug which it sets. Within its scope of authority, a price administration authority shall adjust the ceiling retail price of a drug based on the actual winning price of the bid and market conditions for the drug according to relevant procedures.
6. Each local price administration authority shall strengthen monitoring and inspection to duly correct any pricing actions that fail to observe relevant regulations in the process of collective bid procurement of drugs by medical institutions.
Each provincial price administration authority shall promulgate provincial working rules for the administration of prices of drugs purchased through collective bid procurement by medical institutions.