China has slashed the maximum retail price of more than 1,200 drugs by an average of 21%, with the aim of combating inflation and dissatisfaction over high healthcare costs.

The National Development and Reform Commission (NDRC) had announced the changes earlier this month and will enforce them as of today, estimating that 10bn yuan ($1.53bn) will be saved by patients annually as a result.

The NDRC has also pledged to increase inspections, with those who violate the new restrictions facing fines.

The price cuts are expected to have a significant impact on smaller Chinese pharmaceutical firms rather than multi-national companies, with First Shanghai Securities chief strategist Linus Yip telling Reuters, “The impact is definitely negative to the bottom line of pharmaceutical makers.”

Pfizer, Novartis, GlaxoSmithKline and Sanofi Aventis are all likely to be affected by the decreased prices, as China’s inflation rose to 4.9% in the year to February 2011.