PANAMA CITY, Nov 13 (Reuters) - Panamanian President Martin Torrijos announced widespread reforms to the country's public health system on Monday after dozens of people died from adulterated medicine produced by government laboratories.

Cough syrups and other medicines mixed with diethylene glycol, a solvent commonly used as brake fluid, have killed 41 mainly elderly people since September.

A more expensive chemical, propylene glycol, is generally used in many liquid drugs. A local firm that imported the dangerous chemical is under investigation for selling it to government drug laboratories.

The publicly funded health system is a source of much pride in Panama, where it is a rare pillar of social justice in a country with heavily skewed income distribution. However, confidence has been badly shaken as the death toll rose in recent weeks.

A commission of the country's top doctors will oversee the reforms that aim to cut waiting lists, reduce bureaucracy and increase supplies of key medicines, said the president.

Torrijos announced the closure of the lab that produced the killer medicine.

"Maybe it will cost more, but Panamanians' lives do not have a price. There is no comparison between money and life."

Families of the dead have called for the resignation or removal of Health Minister Camilo Alleyne and the director of the social security fund, Rene Luciani.

Both men said during the height of the crisis that the medicines had likely been tampered with maliciously, a claim they have not since repeated.

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