SHANGHAI (Reuters) - Authorities in China have detained 160 members of a criminal gang in the financial capital of Shanghai after the group lured patients to fake medical clinics and sold them overpriced drugs, Shanghai police said on Tuesday.

The gang cheated more than 500 victims out of 1.7 million yuan ($273,400), using corrupt doctors to inflate drug prices and prescribe large amounts of medicines, the city's police department said on its official microblog.

Corruption is rife in China's healthcare system, hit by a scarcity of doctors, while bribery pushes up the cost of care and creates tension between healthcare workers and patients.

Providing affordable, accessible healthcare is one of the key platforms of President Xi Jinping's new government, with China's healthcare bill set to hit $1 trillion (597 billion pounds) by 2020, according to a report from McKinsey & Co.

More than 600 Shanghai police officials launched a sting operation on April 2, after seven months of investigation, holding 160 suspects in raids on the homes of gang members around the city and seizing crates of medicine and fake firearms, the police said.

The gang would lure patients into four fraudulent clinics, using people placed at hospitals and metro stations to praise the quality of care. Unqualified doctors would then sell them drugs at prices often more than 10 times the real value.

The healthcare scam, which often targeted migrants who had come to Shanghai for treatment, is the largest of its kind to hit the city, say official Chinese media, ranging from the Shanghai Daily paper and Xinhua news agency.

They added that 114 of those detained had been arrested.

Separately, Xinhua said authorities had seized more than 1.61 million fake Durex-brand condoms and arrested 20 people involved in their production in the eastern province of Zhejiang.

Police in the central province of Henan also arrested 19 people for selling "bogus medical devices" made from "overseas waste", Xinhua added, without giving details.

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China has long grappled to control the production and sale of fake and shoddy goods, in a country where everything from basic foods, such as rice and eggs, to iPhones and car parts, can become the target of counterfeiters.

($1=6.2191 Chinese Yuan)

(Reporting by Adam Jourdan; Additional reporting by SHANGHAI NEWSROOM, and Ben Blanchard in BEIJING; Editing by Michael Perry)