Impact of China’s ‘Zero-markup Policy for Essential Drugs’ on Patients, County Hospital Revenue and Government Subsidy Levels

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  • Yanfang Su, Sc.D

China implemented a Zero-markup Policy for Essential Drugs (ZPED) since 2009 and this study evaluated the impact of ZPED on patients, county hospital revenue, and government subsidy levels. Data from Ningshan and Zhenping county hospitals were collected. The primary method of analysis was difference-in-differences. The results showed that ZPED had significant effects on patients and county hospital revenue but limited impact on government subsidy levels.  With regard to patients, for outpatient services, the total expense per visit and the drug expense per visit reduced by 19.02 CNY (3.12 USD) and by 27.20 CNY (4.47 USD), respectively. Importantly, this implies that the non-drug expense increased by 8.18 CNY (1.34 USD) for outpatient services. For inpatient services, the total expense per admission reduced by 399.6 CNY (65.60 USD), with reduction in both drug and non-drug expenses. With regard to the impact on county hospital revenue, ZPED led to an increase in health care provision and a sustained total hospital income despite a decrease in drug revenue. Lastly, the research demonstrates that with minimal or no subsidy, the government can catalyze the zero-markup policy and generate positive outcomes for patients and county hospitals.

yanfang su4x6
Yanfang’s research focuses primarily on health systems from a political economy perspective. She holds a BA in Economics from Dongbei University of Finance and Economics, China, a Master’s in Management from Tsinghua University, China, and a ScD in Global Health and Population from Harvard University, USA. As the first author or the corresponding author, Yanfang has published on evaluation of health policy, equity of healthcare utilization, and estimates of elasticity of demand for healthcare in Health Policy, International Journal for Equity in Health, PLOS ONE, Chinese Health Economics, Chinese Journal of Health Policy, and other academic journals. She has also published news articles in Harvard College Global Health Review, HSPH International Student Newsletter, Hong Kong Economic Journal and People's Daily Overseas Edition. Yanfang's other research interests include survey methodology and field experiments, with a particular interest in cognitive interviewing, list experiments and anchoring vignette methods. Besides research, Yanfang is committed to community service. She is the initiator and currently the project director of the pilot, “Free Prenatal Text Messages to Improve Newborn Health”. Her team has been supported by the UBS Optimus Foundation (with 160,000 USD) to serve 6,000 pregnant women in rural Shaanxi, China, from 2013 to 2016. Prior to Harvard, Yanfang was a Visiting Researcher with the Hong Kong Policy and Research Institute in 2005 and a Research Fellow at Tsinghua University in 2007. In 2009, she entered a training program on qualitative program evaluation at the Center for Disease Control (CDC) in Atlanta, Georgia. Following this, in 2010, she became a Desmond and Whitney Shum Fellow at Harvard's Fairbank Center for Chinese Studies. Currently, she is a Policy Consultant to Bill & Melinda Gates Foundation.