Can the Profitability of Medical Enterprises Be Improved After Joining China's Centralized Drug Procurement? A Difference-in-Difference Design

R&D investment and total factor productivity in China's pharmaceutical industry: The moderating effect of the centralized procurement policy

We use the implementation of China's centralized procurement policy as a quasi-natural experiment to examine the effects of China's centralized procurement policy on pharmaceutical research and development (R&D) investment and total factor productivity (TFP). Empirical findings demonstrate that the positive impact of R&D investment on TFP has a delayed effect in the pharmaceutical sector. The centralized procurement policy shortens this lagged effect by imposing survival pressure and pushing companies to enhance their R&D investment intensity significantly. From the heterogeneity perspective, for companies facing significant financing constraints, the centralized procurement policy significantly enhances the intensity of R&D investment. In contrast, for companies with weaker finance limitations, the impact of the policy on their R&D investment intensity is insignificant. Still, the positive moderating effect of the policy on the relationship between R&D investment and TFP is more pronounced. Based on the findings, policymakers need to take a long-term view and consider the diversified influence of different enterprises. Policies that reduce financing constraints and create an enabling environment for sustained R&D are important and complementary.

The impact of the centralized volume-based procurement policy on Chinese pharmaceutical manufacturing firms' R&D investment: A difference-in-differences approach

Centralized drug procurement is a common practice worldwide to relieve the healthcare burden and promote high-quality development in the pharmaceutical industry. However, scholars have not yet reached an agreement on whether centralized procurement can facilitate the innovation activities of pharmaceutical firms. China's centralized volume-based procurement (CVBP) implemented in 2018 provides an ideal quasi-natural experiment to evaluate the effect of centralized procurement on the R&D investment of the firms. Drawing data from listed manufacturing firms in China's A-share market (2015-2020), the results from a difference-in-differences analysis with different model specifications indicate that the CVBP significantly promotes the pharmaceutical manufacturing firms' R&D investment. Moreover, the positive effect of the CVBP on R&D investment is stronger in pharmaceutical manufacturing firms with high marketing expenses. A series of robustness tests including the parallel trend test, placebo test, and the PSM-DID analysis show that our findings are solid. This paper advances our understanding of centralized procurement in emerging markets and provides new insights into how governments and pharmaceutical manufacturing firms can strengthen innovation.

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.

Challenges and countermeasures for China's centralised volume-based procurement policy in healthcare

To reduce the cost of healthcare expenditures in China, the government has developed a centralised volume-based procurement (CVBP) policy for medicines and medical consumables. Based on tracking the development history of centralised procurement in China, this study explores China's CVBP model. By comparing the centralised procurement models and healthcare expenditure data among China, the United States (U.S), the United Kingdom (UK), and Singapore, we find that China still faces many challenges in implementing the CVBP policy. The main challenges are as follows. First, the policy cannot be guaranteed the effectiveness of implementation without a well-coordinated regulatory mechanism. Second, the CVBP rules and quality evaluation standards are imperfect. Third, the interests of healthcare companies cannot be guaranteed. Fourth, the policy affects the benefits of medical institutions, and the government has not built a compensation mechanism for medical institutions. Fifth, it poses a challenge to the operational capacity and innovation level of Chinese companies. Therefore, this paper posits a three-stage strategy and nine measures that could benefit China's progress in implementing the CVBP policy.

Game-theoretic analysis of governance and corruption in China's pharmaceutical industry

Introduction

With the rapid development of China's pharmaceutical industry, issues of corruption and regulatory effectiveness have become increasingly prominent, posing critical challenges to public health safety and the industry's sustainable development.

Methods

This paper adopts a bounded rationality perspective and employs a game-theoretic evolutionary approach to establish a tripartite evolutionary game model involving pharmaceutical companies, third-party auditing organizations, and health insurance regulatory agencies. It analyzes the stable strategies of the parties involved and the sensitivity of key parameters within this tripartite game system.

Results

The study reveals that adherence to health insurance regulations by pharmaceutical companies, refusal of bribes by third-party auditing organizations, and the implementation of lenient regulations by health insurance agencies can form an effective governance equilibrium. This equilibrium state contributes to reducing corruption in the pharmaceutical industry, balancing the interests of all parties, and promoting healthy industry development.

Discussion

Pharmaceutical companies must balance compliance costs against the risks of non-compliance benefits while maximizing profits; third-party auditing organizations need to choose between fulfilling their duties and accepting bribes, considering their economic benefits and professional reputation; health insurance regulatory agencies adjust their strategies between strict and lenient regulation to maximize social welfare. The paper suggests enhancing policy support, strengthening compliance supervision, improving audit independence, and adjusting regulatory strategies to optimize governance in the pharmaceutical industry. Additionally, the research highlights the role of collaborative efforts among the three parties in achieving sustainable governance. Furthermore, the study conducts a numerical simulation analysis to demonstrate the impact of various parameters on the evolutionary stability of the system, providing practical insights into the implementation of regulatory policies. This research offers new insights for policy formulation and governance in China's pharmaceutical sector, providing significant reference value for guiding the industry's sustainable development.

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.

The impact of Chinese volume-based procurement on pharmaceutical market concentration

Objectives

Optimizing the pharmaceutical industrial structure is the key mission of China's healthcare reform. From the industrial structure perspective, this study empirically evaluated the impact of China's national volume-based procurement (NVBP) policy on market concentration in the hospital-end drug market.

Methods

This study used drug procurement data of China's public medical institutions which obtained from the national database. A quasi-natural experiment was designed involving eleven pairs of matched treatment-control region combinations, with NVBP policy as the intervention measure. The market was defined by drug name (molecular boundary) and city/province (geographical boundary). Market changes were measured from three dimensions: the number of enterprises and products, market share, and Herfindahl-Hirschman index (HHI). Dual comparison approach and difference-in-difference (DID) method with fixed effect model were applied to quantify policy impacts.

Results

The number of enterprises and products decreased by 18 and 83 in pilot regions after NVBP policy, far more than the decreases in control regions (6 and 21). The accumulative market share of 15 bid-winning enterprises increased by 53.67% in volume and 18.79% in value, among which the increment of enterprises with low baseline market share was more prominent (66.64% and 36.40%). Among three enterprise types, the market share of generic consistency evaluation (GCE) certificated generics significantly increased, GCE uncertificated generics significantly decreased, and originators slightly decreased. DID models indicated significantly positive impact of NVBP policy on market concentration, with HHI-volume and HHI-value increasing by 49.33% (β = 0.401, p < 0.01) and 21.05% (β = 0.191, p < 0.01).

Conclusion

The implementation of NVBP promoted the intensive drug circulation and supply of Chinese public hospitals, intensifying the exit of GCE uncertificated generics from the hospital-end market. NVBP combined with GCE standards significantly improved market concentration, which brought a positive signal of pharmaceutical industrial structure optimization in China. In the future context of normalized and institutionalized NVBP, the balance should be further sought between low drug prices and reliable hospital drug supply, sustainable industry development.

The pan-Canadian Tiered Pricing Framework and Chinese National Volume-Based Procurement: A comparative study using Donabedian's structure-process-outcome framework

Background

Generic drugs have been seen as a potentially powerful way to alleviate the financial burden on patients and health care systems. Two strategies for achieving rational prices of generic drugs are tiered pricing framework and pooled purchasing power. We compare the pan-Canadian Tiered Pricing Framework (TPF) and the Chinese National Volume-Based Procurement (NVBP) as comparators to explore the similarities and differences between the two mechanisms and summarise lessons for other jurisdictions.

Methods

This comparative study applies Donabedian's structure-process-outcome framework to systematically analyse the macro contexts, procedures, and long- and short-term results of each pricing mechanism, and the interactions between them.

Results

Structure: TPF is an upstream initiative aimed at lowering the prices of generic drugs and increasing coverage and price consistency. NVBP is a downstream national initiative prioritised for reducing drug prices to achieve value-based purchasing. Process: By associating the number of manufacturers with price cuts, TPF leaves the choice to manufacturers to decide if they want to enter a specific market. In contrast, the Chinese government determines NVBP list and has the authority to choose manufacturer(s) with the lowest price(s). TPF provides clear price information to potential suppliers with unclear order quantity. The NVBP drug price is determined by tendering, while procurement volume is clear and massive. Outcome: The effectiveness of TPF and NVBP is similar, with both achieving a 53% price cut. Both TPF and NVBP experienced efficiency improvement since their establishment, with 98 and 86 drugs priced per year. By comparing 60 drugs covered by both programmes, the NVBP price is 57% of that of the TPF counterpart on average (1.1 to 301.6%), by purchase power parity.

Conclusions

The tiered pricing scheme is feasible in regions with a stable and mature pharmaceutical market, typically seen in high-income countries, while tendering is more workable in low- and middle-income countries where the pharmaceutical market is weak and unstable. Experience in the two countries shows that a coordinated pricing mechanism involves many piecemeal interactive problems, which a sophisticated system with a robust long-range plan may address better.

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.

Prevalence and risk factors of elder abuse in survivors of stroke: A cross-sectional study

Background and Aims

The understanding of the prevalence and risk factors associated with elder abuse in stroke survivors is currently lacking. Therefore, the objective of this study is to ascertain the prevalence and potential risk factors of elder abuse in stroke survivors, while also examining its correlation with insomnia.

Methods

In this cross-sectional study, a total of 485 stroke survivors aged 65 years and older, who received treatment at the Emergency department of Shunde Hospital, Southern Medical University, were subjected to face-to-face interviews using the questionnaire on elder abuse from the Third Survey on Chinese Women's Social Status. A logistic regression analysis was employed to examine the association between risk factors and elder abuse among stroke survivors.

Results

62.27% of the participants reported experiencing elder abuse, with 14.85% of them indicating suffering from more than two subtypes of abuse. Factors such as residing in nursing homes, lower income, and smoking were found to increase the likelihood of experiencing elder abuse and all four subtypes of abuse. Additionally, advancing age was associated with a higher risk of experiencing all four subtypes of abuse, although it did not affect the occurrence of overall abuse. It is worth noting that the self-reported prevalence of the four types of abuse by the elderly themselves was higher compared to the reports provided by caregivers.

Conclusion

Elder abuse is prevalent among stroke survivors, especially those who are residing in nursing homes, with lower income, and smokers. Elder abuse significantly increased the prevalence of insomnia in stroke survivors. Further research is needed to better explore effective measures to reduce the prevalence of elder abuse of stroke survivors.

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

Introduction: The normalized implementation of the centralized volume-based procurement policy for pharmaceuticals is a concerted push for supply-side structural reform of the pharmaceutical industry in China. The impact of the centralized drug procurement policy on pharmaceutical companies' transition from imitation to innovation is investigated to test whether a positive effect occurs in the innovation landscape of the pharmaceutical market. Methods: The double difference method and a series of robustness tests were used based on data from a sample of listed pharmaceutical companies in Shanghai and Shenzhen A-shares between 2015 and 2021. Results: The study found that the centralized drug procurement policy significantly contributed to the increased intensity of innovation input in the Chinese pharmaceutical industry. In terms of regional and firm nature heterogeneity, it was found that firms in the seven provinces belonging to the three economic regions had a better increase in innovation input intensity than other regions. Firms of state-owned nature had a better increase in innovation input intensity than private companies. The mechanism test found a partial mediating effect of nearly 10% for the cost of sales rate on the innovation input intensity of listed companies and a negative mediating effect on corporate operating profit. Discussion: Further research found that the effect of centralized drug procurement policy on the improvement of innovation quality of listed pharmaceutical companies was evident. The innovation development of Chinese pharmaceutical companies no longer focused on the accumulation of innovation quantity.

Healthcare professionals’ knowledge, attitude and practice towards National Centralized Drug Procurement policy in central China: A cross-sectional study

Background: National Centralized Drug Procurement (NCDP), an ongoing government-led policy starting in 2019 in China, aimed at reducing drug costs. During the implementation of NCDP, healthcare professionals (HCPs) still have a certain degree of concern about the policy, which affects the clinical use of related drugs.

Objective: This study aims to assess the level of knowledge, attitude and practice (KAP) of HCPs towards NCDP policy, together with the associated factors that determine their KAP.

Methods: A cross-sectional study was conducted between September and November of 2021 in 30 hospitals in Hubei province in Central China. A self-designed online questionnaire including KAP towards NCDP policy was administered to HCPs. Logistic regression analysis was adopted to identify the factors associated with KAP.

Results: A Total of, 742 HCPs completed the questionnaires. 43.4% of HCPs had good knowledge, 24.7% had a positive attitude, and 23.7% held good practice. Through multivariate logistic regression analysis, HCPs who are males, pharmacists, with senior professional titles and 6–10 years of professional working experience contributed to a higher knowledge level. Pharmacists and HCPs with good knowledge were more likely to have positive attitudes, while HCPs with higher education were less likely to have positive attitudes. Pharmacists, HCPs who had 11–20 years of professional working experience, worked in medium-size urban areas or had good knowledge were more likely to have good practice. Good practice is also associated with the positive attitude towards the efficacy of centralized-purchased medicines and impacts of NCDP policy.

Conclusion: Only a small percentage of HCPs had good KAP towards NCDP policy. Pharmacists showed better KAP than physicians. The positive attitude towards the efficacy of centralized-purchased medicines and impacts of NCDP policy contributed to better practice. High-quality clinical evidence on the therapeutic effects and safety of the centralized-purchased drugs is needed.