Medicine prices in China are falling and profits of pharmaceuticals companies are under pressure as Beijing implements a revolution in drug costs and healthcare finance — but analysts warn that reforms will leave big holes in hospital budgets.

Healthcare spending in China, the world’s second-largest pharmaceuticals market, is forecast to reach $155bn-$185bn a year by 2018, according to IMS Health, an industry research and data provider. But Beijing is struggling to combat intense public dissatisfaction with health services that has led to widespread attacks on medical staff and a growing gap between rich and poor in healthcare provision.

In the past few months Beijing has introduced plans to abolish drug price mark-ups in more hospitals and to give hospital administrators greater clout to negotiate price cuts with suppliers.