Chinese hospital reform would eliminate drug markups

China's State Council issued guidance on broad reforms at the country's 6,800 public hospitals by 2017. According to an English language statement by the State Council, the reforms include eliminating a mechanism that encourages doctors and hospitals to overprescribe drugs, and eliminating drug price markups at hospital pharmacies in favor of "properly priced" drugs.

The guidance calls for public hospitals to make up for lost revenue through increasing the prices of medical services, increasing government investments, reforming payment systems and reducing hospitals' operational costs. Drug sales accounted for 42% of Chinese public hospital revenue in 2010, according to Citi Research. ...