China's pharmaceutical policy is continually evolving, addressing the long-standing tradition in the Chinese medical industry of "supporting medical services through drug sales." During the procurement process, both buyers and pharmaceutical companies have artificially increased procurement costs to serve their own interests, resulting in persistently high drug prices. Some physicians prescribe medications with the goal of maximizing the benefits for hospitals and themselves, leading to a consistently high proportion of medication costs in overall medical expenses for patients.
This directly impacts overall healthcare costs, contributing to the problem of expensive medical care. In response to these issues, the state has been introducing relevant pharmaceutical policies aimed at severing the financial ties between hospitals and pharmaceutical companies, thus decoupling doctors' interests from those of drugs and pharmaceutical enterprises. The main goal is to resolve the significant public concern of "expensive medical care.".
Starting in 2018, China initiated reforms in the medical system across various stages of drug production, distribution, sales, and usage, continuously exploring and adopting new drug procurement models to control procurement costs. In January 2019, the state issued the "National Centralized Drug Procurement Pilot Scheme," implementing a pilot program for volume-based drug procurement in the "4+7" cities, which began to be gradually promoted nationwide in September 2019.
The centralized volume-based drug procurement aims to reduce the financial burden on patients while ensuring reasonable profits for enterprises. Savings in medical expenses are rewarded to medical institutions according to regulations, striving to make this reform beneficial for patients, pharmaceutical companies, and medical institutions alike (Chang, 2021). This policy completely transformed the way hospitals in pilot areas purchase medications and brought structural changes to pharmaceutical production companies. The implementation of this policy presents both opportunities and challenges for the bidding enterprises. On one hand, successful bidders can quickly capture a significant market share, effectively avoiding issues in pharmaceutical product sales channels, while simultaneously reducing sales and channel costs (Liu, 2020).
In this paper, we aim to discuss the changes in the operational performance of different types of pharmaceutical companies following the introduction of the volume- based procurement policy. Our hypothesis is that the volume-based procurement policy may have a positive impact on the gross profit margins of pharmaceutical companies. The pharmaceutical companies in the specific 11 pilot cities will be set as our experimental group, while those outside of the pilot zone will serve as the control group. Additionally, we hypothesize that different types of companies within the experimental group will exhibit varied performances. For instance, the performance of companies in northern China may differ from those in southern China; the impact on pharmaceutical companies may differ from that on medical device companies; and high-tech enterprises may experience different effects compared to ordinary enterprises.
