OBJECTIVE： To provide reference for developing zero-profit drug policy and compensation mechanism better in urban public hospitals. METHODS： Taking a public hospital in a city as an example， effects of zero-profit drug policy on hospitals， patients， health insurance fund and single diseases with different drug proportions [cataract （2.94％） vs. chronic renal failure （38.77％）] were investigated by analyzing the canceled drug addition costs and adjusted medical service price data after developing zero-profit drug policy. RESULTS： After developing zero-profit drug policy， the overall compensation rate in the public hospital was 95.20％. The overall burden of urban patients was reduced， average burden cost was decreased 197.73 yuan every time； while the overall burden of urban and rural residents had increased， average burden cost was increased 17.39 yuan every time； and the overall burden of all patients had decreased. Health insurance fund had decreased， in which， the urban workers were decreased   151 185 500 yuan， and urban and rural residents were increased 4 550 400 yuan. In medical insurance for urban workers and health insurance for urban and rural residents， hospital increased by 7.00％ and 8.99％ in income in the treatment of cataract， the medical insurance fund increased by 12.07％ and 13.67％， and patients’ burden increased by 0.58％ and 3.43％， respectively. For chronic renal failure， hospital income increased by 3.23％ and 3.93％， medical insurance fund decreased by 3.19％ and 3.96％， and patients’ burden decreased by 4.27％ and 3.63％， respectively. CONCLUSIONS： Zero-profit drug policy is the ideal measure for getting rid of “drug-maintaining-medicine”. When developing the policy， it should be combined with actual situation and different diseases to explore adjustment of medical service prices， reasonable financial compensation models and medical insurance payment mechanism.