Reducing the price of pharmaceuticals will reduce expenditures only if markets are sensitive to price. The pharmaceutical market for Chinese hospitals and clinics is not price sensitive because providers rely on profit from pharmaceutical sales to cover operating deficits. The situation is made worse because the markup is higher for expensive, brand-name products than it is for inexpensive domestic products. Therefore, providers have an incentive to continue prescribing expensive products, even though they may be unnecessary for particular patients.