China’s Health Ministry has rolled out a new policy to make essential drugs more accessible to the public, a measure the government hopes will also lead to more mergers and acquisitions in the country’s fragmented pharmaceuticals industry.

The health ministry recently issued a list of 307 essential drugs that will now be eligible for state subsidies of up to 100%, making them affordable for China’s vast rural population and urban poor.

The list is also expected to create new competition for drug approval within the domestic pharmaceuticals industry.

According to Reuters the Ministry of Health head of medical policy and the essential drugs programme Zheng Hong said that this is a brand new system, and is the most crucial and difficult part of the medical reform.

“Essential drugs will be purchased through competitive bidding. It will be impossible for all makers of the same drug to win bids so the impact will be more mergers and acquisitions,” Hong said.

The initiative is part of a wider plan to provide basic and affordable healthcare to the country’s huge population.

The new drug ruling is part of a $124.5bn reform programme that aims to cover 90% of the population with basic medical insurance by 2011.

The initial list of drugs will benefit mostly domestic companies that manufacture basic generic drugs, however, an expanded list to benefit foreign pharmaceutical companies is expected to be issued at later date.