Competitive bidding in drug procurement: evidence from China

Competitive bidding in drug procurement: evidence from China

Collection:
Health Policy and Services Research
Series Title(s):
Working paper (Stanford Institute for Economic Policy Research)
Author(s):
Cao, Shengmao, author
Yi, Xuejie, author
Yu, Chuan, author
Contributor(s):
Stanford Institute for Economic Policy Research, issuing body.
Publication:
[Stanford, CA] : Stanford Institute for Economic Policy Research (SIEPR), January 2022
Language(s):
English
Format:
Text
Subject(s):
Competitive Bidding
Drug Costs
Economics, Pharmaceutical
Models, Economic
China
United States
Genre(s):
Technical Report
Abstract:
We study the impact of competitive bidding in the procurement of off-patent drugs. In 2019, China introduced competitive bidding with a quantity guarantee for thirty-one molecules in nine provinces. Using a difference-in-difference design, we show that the program reduced average drug prices by 47.4%. Generic drug firms won the majority of the bids and on aver- age cut prices by 59.4%. We develop a model of demand and supply to quantify the trade-off between lower prices and choice distortions. Competitive bidding increases consumer welfare if policymakers consider brand preferences welfare irrelevant. The program also reduced government expenditures on insurance by 24.3%.
Copyright:
Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY-NC-ND license. (More information)
Extent:
1 online resource (1 PDF file (40, A-18 pages))
Illustrations:
Illustrations
NLM Unique ID:
9918383988606676 (See catalog record)
Permanent Link:
http://resource.nlm.nih.gov/9918383988606676