Objective To investigate the performance of Essential Medicine List (EML) policy over the past one year in Xintian Township Health Center (XTHC), so as to provide references for the delivery, storage and compensation mechanism of essential medicine for township hospitals. Methods Focus interview combined with a questionnaire was carried out to investigate the supply and usage of EML, the situation of both diagnosis-treatment services and the income-expenditure change before and after EML policy. Results a) It showed that there was an increasing trend with the preparation rate of EML from 62.2% before implementation to 87.3% after, and the proportion of EML income to total medicine expenses increased from 39.3% to 90.6% in XTHC. But problems still existed such as incomplete and old variety of medicine; b) The numbers of outpatient-time and inpatient-time kept growing, while medical cost for both average clinic cost and average hospitalization cost decreased to different extent; c) Although the gross income increased slightly, this center was still running in the red with the limited amount of financial assistance; and d) The proportion of medical care and drug kept decreasing while the proportion of drug cost and examination cost kept increasing. Compared with the situation in 2009, the proportion of examination cost from 2010 to 2011 had increased by 30%, and it still remained at the previous level after EML implementation. Conclusion The implementation of EML does not completely change the predicament of “Make compensation for doctors by selling drugs” in township health center. Owing to the sale policy of zero price difference and the poor performance of compensation for township health centers, XTHC is still running under deficit. Evidence-based medicine selection and research on compensation mechanism for underdeveloped areas are urgently needed.