The impact of the reference pricing policy in China on drug procurement and cost

Abstract

Abstract High drug costs are putting pressure on healthcare budgets and posing an obstacle for China to achieve universal health coverage. Policies such as the direct price ceiling and the Essential Medicines Program—with the Zero Markup Drug Policy (ZMDP) one key component—have been implemented, but out with limited evidence of success. As a benchmark of China’s recent health reform, Sanming city initiated the ZMDP in January 2013; and further piloted the first reference pricing (RP) policy in China in September 2014, with the intention to disincentivize the use of costly original drugs. In this study, we used hospital-based drug procurement data of 14 drug substances that were subjected to RP, from four hospitals in Sanming and a neighbouring city Longyan, between 2012 and 2016. Adopting the difference-in-difference (DID) approach, we evaluated the impacts of RP together with the ZMDP. On the one hand, we found that the ZMDP had no impact on drugs’ procurement prices, volumes and costs. While on the other hand, we found that the introduction of RP was not associated with changes in unit prices for the 14 drugs in Sanming. However, the RP pilot was associated with a 25.9% (95% confidence interval (CI), 12.9–37.0%) decrease in monthly drug procurement volumes and a 47.7% (95% CI, 33.7–58.7%) decrease in the total drug costs. In particular, it reduced the procurement volumes of original drugs by 56.8% (95% CI, 47.0–64.7%). Subgroup analyses by hospital level and therapeutic class found similar results. We draw lessons for the Chinese government to experiment with RP on a larger scale, considering the development and effective regulation of the generic market. This is a first report on the effects of RP in China, Asia and middle-income countries.