In Depth: The Illicit Drug Trade Lurking Behind ‘Free’ Dialysis

In 2017, Zhao Shi, a construction worker in Guangdong, China, experienced severe swelling in his foot due to untreated diabetes, resulting in kidney failure. Warned by doctors that he needed immediate dialysis to survive the long wait for a kidney transplant, Zhao returned to his hometown in Suining, Sichuan, and began treatment at a local public hospital. Each four-hour session cost 610 yuan (about $85), requiring thrice-weekly attendance and an out-of-pocket expense of nearly 2,200 yuan monthly, even after insurance reimbursements. Zhao, unable to work, joined a government welfare program, and later discovered a new Wego dialysis center offering free treatment and additional perks for insured patients, such as transportation, free lunches, and a monthly stipend of 500–600 yuan. However, he also encountered systemic insurance fraud within this new setting [para. 1][para. 2][para. 3][para. 4].

Interviews by Caixin revealed that certain Wego dialysis centers recruited patients with these perks, then manipulated insurance claims by prescribing and acquiring excess dialysis medication, which was resold to middlemen. Profits were shared among patients and staff. This practice violated Chinese regulations, specifically the Regulations on the Supervision and Administration of the Use of Medical Security Funds, which forbid overprescribing, resale of drugs, accepting cash or rebates, and facilitation of such activities by medical institutions. While the Wego center’s representatives and affiliated doctors denied involvement, local regulators took notice, with Suining’s Medical Insurance Bureau soliciting public reports of insurance fund misuse [para. 5][para. 6][para. 7][para. 8].

Wego dialysis centers belong to the Weigao Group, a major Chinese medical company valued at around 78 billion yuan, originally specializing in medical devices before expanding into dialysis services. The group runs four centers in Suining, each reportedly treating over 100 patients on peak days with three dialysis shifts daily. Caixin’s investigation confirmed many claims about patient perks, including transportation services; drivers reported shuttling patients since late 2023 for additional income. Several patients confirmed receiving monthly stipends, though managers officially denied offering such subsidies [para. 9][para. 10][para. 11][para. 12].

Since 2012, national health insurance in China has covered dialysis, with inpatient reimbursement rates reaching 90%. Many provinces also treat dialysis as a special outpatient service with similar coverage. For example, Zhao’s session at a primary hospital cost 1,382 yuan, of which insurance covered 967.4 yuan, leaving 415 yuan to be paid by the patient. High patient volumes can allow centers to generate significant insurance revenue even when waiving patient fees. However, profitability is tight due to operating costs, subsidies, and competition-driven perks, amounting to nearly 1,000 yuan per session and about 3 million yuan monthly for a center with 3,000 sessions [para. 13][para. 14][para. 15][para. 16][para. 17].

To compensate, some centers turned to selling surplus medication. Patients were often encouraged to secure extra prescriptions at public hospitals, exploiting a lack of information sharing between institutions. These drugs, including sevelamer and corbrin capsules, were purchased at 10–20% of retail price (after insurance reimbursement) and resold at half market value, yielding patient profits of 30–40%. Some patients earned 200–500 yuan monthly from these sales. Authorities uncovered cases, such as three patients defrauding 24,000 yuan through this scheme in 2024. Wego centers reportedly kept a substantial portion of profits, and had previously been penalized for insurance irregularities, including a 1.32 million yuan repayment and a fine. Ongoing regulatory scrutiny and tighter insurance tracking in 2024 have reduced the prevalence of these practices, as patients feared arrest and largely ceased reselling medication [para. 18][para. 19][para. 20][para. 21][para. 22][para. 23][para. 24][para. 25][para. 26][para. 27][para. 28][para. 29][para. 30][para. 31][para. 32][para. 33][para. 34][para. 35][para. 36].

Zhao Shi, a pseudonym, was one such patient who ultimately stopped reselling drugs due to increased risk [para. 37].