Abstract: Objective: To analyze the impact on the hospital management after the zero profit drug policy has been implemented. Methods: To collect the data of fiscal revenue, work load, medical income proportion and annual cost of our hospital in the first year after the reform and to compare them with that of the same period of time, thus we can discover the reasons behind the data change. Results: Through zero profit drug policy, we have a noticeable decrease in the medicine income both of the hospital and the patients, by such methods as selling drugs on a moderate price, reforming the distribution system in all clinical departments, increasing the fee of diagnosis and therapy and reinforcing the drug-use supervision and management, and so on. As a result, we must promote the “Two invoices system” and optimize the process, so as to ensure the drug fee being one step closer to the reasonable standard , at the same time, effectively control the non-drug income. Conclusion: The zero profit drug policy has abolished the long-existing potential rule called supporting hospital with medicine profits and has shifted the income structure of the hospitals. It has been greatly motivating the staffs in hospitals to work hard, in the end, promoting the hospital management in a virtuous cycle.