Industrial effects of latest China’s medical reform on drug prices

ABSTRACT China has constantly been adjusting drug pricing regulation, trying to balance between drug companies and the public, but the outcome is not as expected. Until recent years, the government has carried out comprehensive medical reform. It not only abandoned the ‘medicine mark-up’ mechanism that has been implemented for more than 60 years, which changed the drugs’ price structure to reduce the prices, but also implemented the ‘4 + 7’ volume-based purchasing system, which further improved the centralized bidding procurement system, tried to return the pricing power to the market mechanism, and exchanged the huge market share for the low prices. As of today, medical reform has been implemented for more than three years. Although many studies have discussed its results, most of them only focused on the impact of medical reform on drug prices, but ignoring the impact on R&D incentives of pharmaceutical companies and ignoring the influence on related industries. This paper is devoted to discussing the impact of medical reform on drug prices, the R&D of pharmaceutical companies, and retailed industries.