The inside story on over-priced medicine in Chinese hospitals which has been uncovered recently rings a bell for China's medicine procurement system aimed to reduce costs and prices.

The manufacturer's price for asparagus tablets, which provides adjuvant therapy to cancer, is only 15.5 yuan. A hospital in Hunan – Xiangya No. 2 Hospital – sells it to the patients at 213 yuan. The profit rate is 1300 percent. The inside story on over-priced medicine in Chinese hospitals was recently uncovered by the media.

The profit is divided between drug companies, medical representatives and doctors, among whom the doctors get the most: for every bottle of asparagus tablets, doctors get 80 yuan.

From the drug manufacturer to the patient, the tablet goes through a very strict system of drug procurement set by the government. The original purpose of the system was to reduce costs and medicine prices to relieve the burden placed on patients. But from the asparagus tablet, it's obvious that the system boosts prices.

The price doubled from the manufacturer to the drug company. According to procurement regulations, the drug administration sets a guide price during procurement, which is the ceiling price for the medicine. The asparagus tablet rocketed to 136 yuan during this process. It's the government institution, which should have prevented the medicine from overpricing, that pushed up the price.

The retail price that Xiangya No. 2 Hospital, the largest A-grade hospital in Hunan Province, sold the asparagus tablets for was approved by Hunan Bureau of Commodity Price. So although the price is super high, it's legal. The government authorized the rocketing price of the asparagus tablets.

The reasons why procurement and price approval system failed on the asparagus tablets are: First, the information is not transparent and supervision not in place. Second, the people who carry out the policies neglect their duty and have low moral standards.

The asparagus tablet case rings a bell for the National Basic Medicine System. Without public supervision and legal binding, the system will become a tool for insiders to get illegal income.

(This post was first published in Chinese in Beijing Youth Daily and translated by Chen Chen.)