IN an effort to control spiralling costs, China is attempting to overhaul its huge national health care system through reform of the national reimbursement scheme. The reforms will have a significant impact on the profits of both foreign and joint-venture operations with interests in China. For pharmaceutical giants such as Eli Lilley, Glaxo, Jensen and SmithKline Beecham, which are planning or already have significant investment in China, the changes could be damaging, say industry sources. The national reimbursement scheme enables those covered to recover the cost of prescribed medicines. The Ministry of Public Health and local authorities are in the process of developing a master list of products to be designated reimbursable. In theory, if physicians prescribe or patients choose products not on the master list they will have to pay themselves. ''Our goal is to provide quality care at a reasonable cost,'' said an official from the Ministry of Public Health. ''We will reduce expenditure by using more generic products as well as limited formula areas. It is our hope that companies will take measures, such as reduction of promotional expenses, to reduce the cost of their products.'' The official also pointed out that joint-venture products with a proven track record would have an advantage over newcomers. Imports of drugs without special qualities absent from locally produced or joint-venture products will be seriously limited. The ministry claims that the master list will be available by the end of the year, but industry experts are sceptical. Provinces and municipalities are developing lists of their own that will be submitted to central authorities, who will then produce a master list. Shanghai's list came into effect on April 1. Some doubt that the master list will be used nationally, as it is meant to be. ''The national list won't mean a thing: provinces and cities will stick to their own guidelines,'' said one employee of a foreign joint venture. There is a tendency for centrally issued laws and regulations to be ignored on a provincial level. ''The products which are selected will be big winners, while those which are not chosen will lose substantially,'' said Mr Matthew Estes, national hospital sales director for Tianjin SmithKline & French. ''Hospitals and distributors simply won't want the product. It will be critical for companies to prove both the local and international clinical efficacy of their products.'' Mr Estes said companies would have to be aware of regional differences, noting that more developed regions tended to have more advanced medical care and more money to spend on foreign and joint-venture products. The ministry says the national list will be reviewed annually. This means companies will have to keep persuading decision-makers of the value of their products. Expenditure on medicine from the national health care budget increased from 2.7 billion yuan (about HK$3.64 billion) in 1982 to 30 billion yuan in 1991. The national health care system, jointly administered by the Ministry of Public Health and the State Pharmaceutical Bureau, provides complete medical coverage for 163 million people. This figure includes government employees, military personnel, employees of state enterprises, and college students. Many foreign pharmaceutical companies have been cautious about China because of the lack of intellectual property protection. However, China's recent efforts to ensure foreign companies are protected, which include joining the Berne Convention and signing a memorandum of understanding with the United States last year, have resulted in increased investment by the pharmaceuticals industry.