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