As China gets older faster than it gets richer, her pharmaceutical industry is under threat. Owing to sky high prices of medicines, thrust onto citizens by local hospitals, the Central government has cracked down on drug prices in a policy to be implemented from June 1st, 2015. In the recently released pilot program, Beijing has introduced plans to abolish drug price mark-ups in more Chinese hospitals and to give hospital administrators greater clout to negotiate price cuts with suppliers.

To further avert corruption that has severely tinged the pharma industry in China, China’s State Council, announced this month that a pilot programme to reform the hospital finance system would be extended to 100 big cities this year, with the goal of covering all urban public hospitals within two years. The pilot programme scraps the 15 percent mark-up that Chinese hospitals typically place on drug sales, providing them with 40 percent or more of their budgets.

For anyone who frequents the India-China route and has local friends on the other side of the bamboo curtain knows that cancer drugs from India are in high demand in China primarily because they are typically 1/6th – 1/10th the price in India. Corruption, riddled with a pharmaceutical industry that is flamed by hospitals being the sole dispenser of drugs in China has created an illicit circle wherein the prices of medicines are highly inflated.

With the new crack down in place, experts are worried that hospitals will lose their cash cow and will lead to increasing user fees even as government resources to fund hospitals evaporate. This could lead to a higher segregation in society as the poor are further marginalized.

Over the past few years, India has hosted several delegations from various sections of the Chinese pharmaceutical industry. China is trying to study the Indian model of availing medical aid to the poorest and furtherest sections of the country. With similar problems of funds, low connectivity of villages and corruption, India understands China. Yet, with the Indian pharma indutry booming, low prices on API’s and several companies working on soon to be off patent drugs, India’s problem isn’t as sever as China’s.