This paper examines the financing, pricing, and utilization of pharmaceuticals in China—the pharmaceutical system as it has evolved, and some changes that would improve it in the context of the national health reform process. The present paper builds upon earlier critical reviews and other papers published in the series China Health Policy Notes. The present version has been updated to reflect key steps, especially between 2005 and 2010, in the evolution of a formal Essential Medicines System as a product of the major national health reform formally launched in April 2009. A brief introduction is followed by substantive sections on the Chinese pharmaceutical market today, the national system of essential medicines, and the ongoing struggle to contain constantly rising pharmaceutical costs. Several ideas for strengthening the reform process are discussed in the final section...