The Illicit Drug Trade Behind ‘Free’ Dialysis (AI Translation)

【周刊提前读】“免费”血液透析背后的药品倒卖生意

Summary:

This in-depth investigative report centers on a large-scale issue in the blood dialysis industry in Suining, Sichuan, focusing on the business practices of the Weigao dialysis centers and illustrating broader trends in China's expanding private medical services sector. The text follows the experiences of Zhao Shi, a 64-year-old end-stage renal disease patient dependent on regular dialysis, and delves into how economic incentives and regulatory loopholes have fostered a complex web of profit-driven healthcare practices, including the abuse of the medical insurance system through the over-prescription and resale of dialysis medicines. [para. 1][para. 2]

Zhao Shi, along with 2,000+ local patients, relies on hemodialysis for survival, typically costing upwards of 2,000 yuan monthly even with insurance and welfare benefits. Patients often seek out facilities with lower fees; at Weigao Hemodialysis Centers, Zhao found "free" treatment—no personal expense, plus subsidies of 500–600 yuan per month, free transportation, and meals. Over half the patients reportedly sell surplus medications received, earning an extra 200–500 yuan monthly. These attractive incentives have spurred a wave of patients, even from neighboring locales, to flock to these centers, making such benefits common subject matter in patient message groups. Weigao's local operations are part of a national chain with up to 100 centers serving over 8,000 patients, with a concentrated presence in Sichuan. [para. 2][para. 3][para. 4]

A key component of the profitability model involves overprescribing drugs. Weigao centers allegedly submit patients’ insurance cards to various hospitals to obtain large quantities of medications, far exceeding actual clinical need. Patients are then encouraged—often by center staff—to resell the surplus through intermediaries, with proceeds split among the center, the patient, and the broker. Investigations found that medications like Bai Ling capsules and keto acid tablets were routinely prescribed at double actual usage, resulting in a robust secondary market where patients, central staff, and external brokers profit by selling drugs at discounted rates. [para. 4][para. 5][para. 6]

This practice constitutes fraudulent use of medical insurance funds, with official investigations and sanctions already imposed. Violations include duplicate charges, prescribing inconsistencies, and unauthorized waiving or reducing of patient costs post-insurance, leading to individual center penalties—one as high as 131,830 yuan. However, the regulatory response, while increasing in scope, faces obstacles owing to inadequate inter-hospital information sharing and difficulties in tracking prescription and drug resale flows. [para. 6][para. 8]

The rapid spread of private dialysis centers like Weigao is partially driven by capacity shortfalls in public hospitals and encouraged by government policy promoting broader coverage, especially in less affluent regions. Since 2011, private capital, led by Weigao, has established independent centers as publicly run hospitals focus less on the financially thin endeavor. Still, the sustainability of these centers comes under stress from cost-cutting measures like national group purchasing (“集采”) of consumables, causing profit margins to narrow significantly. The industry is struggling with profitability—the largest listed players, including Weigao, note declining operating profits despite growing revenues. [para. 12][para. 13][para. 14]

Weigao Group, a 78 billion yuan medical conglomerate, has woven an integrated system connecting their production of dialysis equipment and pharmaceuticals with service delivery in their clinics, exemplified by complex equity and supply chain arrangements between subsidiaries and related parties. While the group professes to follow regulatory and pricing standards, ongoing investigations into fraud threaten both reputation and valuation; for instance, related parties of Weigao have repeatedly featured among top clients and suppliers, exposing the system to regulatory scrutiny. [para. 16][para. 17][para. 18]

Intensifying oversight—such as strict insurance claim code tracking and more aggressive investigation of fraudulent activities—are beginning to curb medicine resale activities. Some patients, now fearing prosecution, have suspended such practices. Meanwhile, patients like Zhao remain caught between financial pressure and care needs, with long-term improvements hinging on effective systemic reforms in medical insurance supervision and the alignment of incentives in private healthcare delivery. [para. 21][para. 22][para. 23][para. 24][para. 25]