December 7, 2005

The cost of hospital care in China has recently come to the foreground after a patient in the country was charged CNY5.5mn (US$0.68mn) for two months of cancer treatment prior to his death. A large proportion of these expenses was made up of expensive imported drugs, which the hospital had encouraged the patient's family to buy.

The Chinese government has pledged to investigate the matter and take action against the overcharging, including possibly punishing the staff members involved. In the past, China's healthcare system was publicly funded but under the current system patients must pay for medical services in advance. Meanwhile, hospitals have suffered from severe cuts in funding and now generate up to two-thirds of their revenues from drug sales.

The problem has been exasperated by recent laws, which encouraged hospitals to raise drug prices by up to 15% in order to make a profit. China's Health Ministry has modified its policy, and in May 2005 announced that it would bar hospitals from raising pharmaceutical prices. In September, the government further announced that the prices for over 400 medicines in 22 therapeutic areas would be cut, claiming a likely saving of CNY4bn (US$494.3mn) per year.

China's hospitals account for 80% of the drug market, due to their central role in both prescribing and dispensing. Despite government cost-containment measures, the pharmaceuticals sector is forecast to expand rapidly in the near future, reaching US$40.9bn by 2009, driven by the country's large population and low drug consumption levels.