The impact of centralized band purchasing of pharmaceuticals on innovation of Chinese pharmaceutical firms: an empirical study based on double difference models

Abstract

In 2018, China began to gradually promote the pilot policy of centralized band purchasing of medicines. Implementing this policy has resulted in a significant decrease in drug prices. However, there needs to be a clear consensus on the impact and mechanism of action on the innovation of pharmaceutical companies. Therefore. Taking the data of Chinese Shanghai and Shenzhen A-share pharmaceutical listed companies from 2016 to 2022 as a sample, this paper empirically investigates the impact of the centralized banded purchasing policy of drugs on the innovation of pharmaceutical enterprises by using a double difference model and further analyzes the mechanism of its action. The results show that implementing the centralized banded purchasing policy can promote pharmaceutical enterprises’ innovation input and output, which is robust under the parallel trend and placebo tests. Further exploring the impact mechanism of the centralized band purchasing policy on pharmaceutical enterprises’ innovation, it can be found that it promotes innovation inputs through three channels: government subsidies, enterprise profits, and operating income. In addition, the impact of centralized band purchasing on enterprise innovation is heterogeneous in terms of region, enterprise nature, and scale. Therefore, the positive effects of the centralized band purchasing policy on promoting innovation in pharmaceutical enterprises should be fully recognized, and enterprise heterogeneity should be taken into account when implementing the policy. This study provides empirical evidence on the implementation effect of the centralized banded purchasing policy and provides lessons for continuously optimizing the policy to promote the high-quality development of pharmaceutical enterprises.