Does China's centralized volume-based drug procurement policy facilitate the transition from imitation to innovation for listed pharmaceutical companies? Empirical tests based on double difference model

Current challenges and future perspectives of drug discovery in China

INTRODUCTION

China's pharmaceutical industry, which is historically centered around generic medicines, has largely transformed from imitation to innovation over the past three decades. Despite unprecedented progress, critical challenges remain such as insufficient indigenous research funding, underdeveloped academia-industry relationships, and significant barriers to market access.

AREAS COVERED

This perspective examines the evolving pharmaceutical landscape of China, focusing on its participation in global clinical trials and the resultant new drug approvals. Data for this analysis was sourced from several databases (e.g. PharmCube, NextPharma, and PharmaGO), academic reports, and published literature, covering data up to 2024 (unless otherwise specified). This perspective highlights ongoing regulatory challenges, such as inconsistencies in product standards, and the approval processes relative to the U.S.A. and the European Union. There is also an urgent demand for sustained international investment and recognition, partially due to the recent changes in the geopolitical environment. This perspective also discusses China's efforts to implement accelerated approval pathways and foster multilateral development collaborations.

EXPERT OPINION

China must align its regulatory policies more closely to the international norm to generate robust trial data that will be readily acceptable to the FDA and EMA. Continued investment in biologics as well as cell and gene therapy and artificial intelligence will drive innovation and enhance competitiveness. Additionally, strengthening the academia-industry collaboration is crucial to obtaining new leads through translational research. Ultimately, structural reforms are required to solidify the country's goal of becoming a major player in the global pharmaceutical market.

Research and development investment of Chinese chemical pharmaceutical companies under the national pooled procurement: a retrospective panel data analysis, 2013-2022

OBJECTIVE

To generate evidence about changes in the research and development (R&D) investment of Chinese chemical pharmaceutical companies before and after the implementation of the national pooled procurement, to respond to the concerns that significant price reductions might negatively affect R&D investment, and to facilitate the evidence-based decision-making for improvement of the national pooled procurement.

METHODS

This retrospective study employed the fixed-effects models with robust SEs to analyse the changes in R&D investment intensities of 76 A-share listed Chinese chemical pharmaceutical companies before and after the procurement implementation in 2019. The analyses were based on a panel data set between 2013 and 2022. Subgroup analyses were conducted to account for the heterogeneity of the target companies. The bootstrap hypothesis test method was employed to assess potential variations across the different subgroups.

RESULTS

Following the procurement implementation, the R&D investment intensity (RDI) of the target companies increased by 1.9% (p<0.05) compared with the RDI before the procurement implementation. Successful bidders exhibited a higher RDI of 2.2% (p<0.01) compared with that of the other suppliers. The RDI of companies engaged in traditional Chinese medicine (TCM) production was found to be 2.4% lower (p<0.01) than that of companies not involved in TCM production. Similarly, the companies engaged in the production of active pharmaceutical ingredients (APIs) had a 1.6% lower (p<0.01) RDI than those not involved in API production.

CONCLUSIONS

This study found that the enthusiasm of Chinese chemical medicines companies towards investing in R&D following the medicines regulatory reforms was not suppressed when the pilot pooled procurement was expanded and continued. The overall level of RDI following the pilot was higher than that before the pilot during the entire observation period. The enhanced investment in R&D has been a distinctive feature of Chinese chemical pharmaceutical companies that position themselves with more substantial market competitiveness.

Impact of National Centralized Drug Procurement policy on chemical pharmaceutical enterprises' R&D investment: a difference-in-differences analysis in China

Objective

This study aimed to evaluate the impact of the National Centralized Drug Procurement (NCDP) policy on chemical pharmaceutical enterprises' R&D investment and provide references for improving NCDP policy design and encouraging innovation in the pharmaceutical industry.

Methods

Using the panel data of 102 Shanghai and Shenzhen A-share listed enterprises from 2016 to 2022 under the chemical pharmaceutical classification of Shenwan in Wind database as the research sample, this study developed difference-in-differences (DID) models on bid-winning and bid-non-winning enterprises, respectively, to evaluate the impact of NCDP policy on their R&D investment. In addition, this study tested the heterogeneity of bid-winning enterprises based on the bid success rate, the decline of drug price, and enterprise size.

Results

The NCDP policy could encourage chemical pharmaceutical companies to increase R&D investment, but the low bid success rate and excessive drug price reduction would reduce their R&D enthusiasm, especially for small- and medium-sized enterprises.

Discussion

It is suggested that the NCDP policy should be further improved: first, revise the bidding rule of the NCDP policy and increase the bid success rate so that more enterprises can win bids, and second, to solve the problem of excessive drug price reduction, evaluate the rationality of bid-winning prices, and introduce a two-way selection mechanism between medical institutions and supply enterprises. Integrate pharmacoeconomic evaluation into the NCDP rules to form a benign competition among enterprises. Third, attention should be paid to supporting policies for small- and medium-sized enterprises. By increasing procurement volume, shortening payment time limits, and increasing the proportion of advance payments, enterprises' cash flow shortages can be alleviated, thus achieving fairness and inclusiveness in the implementation of the NCDP policy.

Quantitative evaluation of the medicine innovation policy in China: based on the PMC-Index model

Introduction

Medicine innovation is crucial in promoting the sustainable development of medicine undertakings, which has significant economic and social benefits. China is the main force in global medicine consumption, with a huge demand for innovative medicines. Thus, the Chinese government releases a series of policies aimed at providing scientific and reasonable guidance for medicine innovation. However, there is inadequate quantitative evaluation and comparison of various medicine innovation policies in the existing studies.

Methods

This paper adopts the approach of text mining and the Policy Modeling Consistency Index (PMC-Index) model to construct an evaluation system and then quantitatively evaluates and compares the traditional Chinese medicine innovation policies (TCMIPs), the biological medicine innovation policies (BMIPs), and the multiple medicine innovation policies (MMIPs) in China.

Results

The results indicate that: (1) The three types of drug innovation policies have similarities in content and goal through comparative analysis of high-frequency words, while they also have their own characteristics. (2) The average PMC-Index of 29 TCMIPs is 5.77, which has the highest policy bad rate (21%); the average PMC-Index of 12 BMIPs is 6.21, which has the highest policy good rate (92%); moreover, the average PMC-Index of 35 MMIPs is 6.06, which has the highest policy excellence rate (26%). (3) The BMIPs, MMIPs, and TCMIPs have similar scores on policy object, policy orientation, policy timeliness, policy evaluation, and policy accessibility, while they differ significantly mainly on policy nature, incentive method, policy function, policy issuing agency, and policy instrument.

Discussion

This study contributes to a comprehensive understanding of medicine innovation policies in China, in order to provide theoretical support for future policy formulation and optimization in the medicine industry. Moreover, we expand the application scenarios of policy diffusion theory.

Research on the impact of China's reform to delegate power, streamline administration, and optimize government services on the technology innovation efficiency of the pharmaceutical manufacturing industry

Objective

The government has recently implemented reforms aimed at delegating power, streamlining administration, and optimizing government services. This reform has eliminated barriers that impede the growth of various industries, thereby unleashing innovative potential. Additionally, there have been several medical policies, including changes to medical insurance and centralized volume-based procurement. China's pharmaceutical market has undergone significant changes, leading to increased demands for innovation technology efficiency in pharmaceutical manufacturing.

Methods

The three-stage BCC theory was employed to assess the effectiveness of technology innovation in the industry under this reform. Calculate precise comprehensive technical efficiency values, pure technical efficiency values, and scale efficiency values for technological innovation in the pharmaceutical industry across 30 provinces from 2018 to 2020, after removing environmental factors.

Results

In 2020, Jiangsu and Shandong and nine other provinces reached the comprehensive technical efficiency frontier surface, joining Tianjin, Zhejiang, and Guangdong provinces. However, Gansu, Qinghai, Ningxia, and Xinjiang still need to catch up due to their smaller industrial scale and lack of technology.

Discussion

To ensure the effectiveness of reforms, it is crucial to fully consider provincial differences. Articulating national and provincial policies is necessary to allow efficient provinces to continue and allocate resources toward less efficient provinces to improve overall efficiency.

Impact of China's National Centralized Drug Procurement Policy on pharmaceutical enterprises' financial performance: a quasi-natural experimental study

Introduction

In China, the interest relationship between pharmaceutical enterprises and medical institutions has harmed the healthy development of pharmaceutical enterprises. In November 2018, the National Centralized Drug Procurement (NCDP) policy was published. The NCDP policy severs the interest relationship and significantly impacts on pharmaceutical enterprises's financial performance.

Methods

Using the implementation of China's National Centralized Drug Procurement (NCDP) policy as a quasi-natural experiment, this study evaluated the impact of participation in the NCDP policy on pharmaceutical enterprises' financial performance. We developed a difference-in-difference model to estimate the change in financial performance after NCDP implementation, based on financial data on Chinese listed pharmaceutical enterprises.

Results

We found that the bid-winning enterprises' financial performance significantly improved after participating in NCDP. This may be related to lower costs, market share expansion, and increased research and development investment by the bid-winning enterprises.

Discussion

To further promote the high-quality development of pharmaceutical enterprises in China, the government should expand the variety of drugs on the NCDP list (NCDP drugs), while improving the drug patent protection system and the policies to support the bid-winning enterprises.