China issued eight guidelines about a month ago to further regulate drug prices as part of a national campaign to promote more affordable medical services for its people and to slash excessive profits in drug distribution.

The National Development and Reform Commission and seven other government departments drafted the guidelines.

One among the major initiative is to stipulate a profit cap of 15 percent for non-profitable medical service providers such as public hospitals on the drugs they buy from distributors. At present hospitals, which are given subsidies by the Government for drug purchases, are allowed to raise prices of drugs they purchase from the distributors by 15 percent, as the Government decides retail prices of most of the drugs. However, the doctors' further increase the retail prices by another 20 to 40 percent as their margin, causing high financial burden on the consumers. For some new drugs, the manufacturer gets 20 percent of the profit, the distributors 40 percent and the hospital and doctors take 40 percent. The cap is to eliminate such practices.

The guidelines also stipulate drug prices by checking and ratifying factory prices and related to this, the Government is planning to launch a pilot program on selected drugs. Further, pharmaceutical manufacturers have to display the suggested retail prices on drug packages based on reasonable profit margins. Reports said the guidelines also aim to slash excessive profit in drug distribution and also help protect the makers which face rising costs of raw materials.

Figures released by a national health survey show a Chinese citizen pays 108.2 yuan (13 US dollars) in out-patient departments in 2003, up 57.5 percent over 1998; while paying 3,910yuan (477 US dollars) in in-patient departments in 2003, up 76.1 percent over 1998. Both of the two percentages are much higher than the growth rate of people's income. In China, a lot of medicine are sold at the price 10 times as much as it comes out from pharmaceutical factories.