ArticleCost effectiveness and resource allocation : C/E2025
Impact of national volume-based procurement reform on the markup of pharmaceutical firms: an event study.
Article in Cost effectiveness and resource allocation : C/E, 2025. The graph could read no effect estimate from its abstract, so it casts no vote on the map. Cited by 3 papers.
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Who cites it
3 citing papers in PubMed.
- Unintended consequences of National centralized volume-based drug procurement policy in China: a game theory-based analytical approach for pharmaceutical quality and pricing.Cost effectiveness and resource allocation : C/E · 2026Article
- Article
- The impact of DIP payment reform on hospitalization costs and equity in type 2 diabetes mellitus patients: evidence from a pilot city in Central China.Frontiers in public health · 2026Article
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Authors and funding
3 authors.
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No grant is acknowledged in the PubMed record.
Abstract
backgroundIn 2018, China’s National Healthcare Security Administration initiated a transformation of drug procurement towards national volume-based procurement (NVBP) of drugs, which disclosed the quantity information in the procurement auction, effectively reducing drug prices. We aim to theoretically and empirically shed light on the markup channel for the price effect, and explore the welfare effect of NVBP reform.
methodsBased on the price discovery mechanism of reverse auction and the comparative analysis of the centralized procurement system before and after the reform, this study theoretically analyses the effect of the NVBP on pharmaceutical companies’ pricing strategies and the welfare consequences of the policy. Our theoretical model predicts reduced drug prices and increased procurement volume after the reform. We then empirically test these predictions by performing a difference-in-difference (DID) exercise on pharmaceutical firms’ markups and sales.
resultsThe DID results show a significantly negative impact of NVBP on pharmaceutical firms’ markups (−0.0378, significant at 1%), a significantly negative effect of NVBP on markups for the chemical medicine producers with a larger scale of coefficient (−0.0411, significant at 1%), while a negative but insignificant coefficient for the other medicines (−0.0219). The results also show a significantly positive effect of NVBP on pharmaceutical companies’ sales (0.148, significant at 1%).
conclusionsThe NVBP reform reduced the markups of pharmaceutical firms. The chemical medicines, which were highly exposure to the policy shock, were affected significantly, while the effect on the other types of medicines is weak. The NVBP reform also promoted the sales of medicines, and thus improved the social welfare. A further mechanical analysis shows that these results are mainly driven by a removal of market uncertainties, corruption, and transaction costs in the procurement process.
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