Collective pharmaceutical procurement in China may have unintended consequences in supply and pricing

Jiang, Shan and Chen, Zhuo and Wu, Tao and Wang, Hui (2020) Collective pharmaceutical procurement in China may have unintended consequences in supply and pricing. Journal of Global Health, 10 (1). ISSN 2047-2978

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Abstract

The collective pharmaceutical procurement was launched in China in 2018 to reduce the prices of

selected drugs, by pooling the demands of member cities and granting the contract to the manufacturer with the lowest bid. We found the procurement significantly decreased the prices of most

drugs. We also identified significant price increases on some drugs, indicating that manufacturers of these

drugs may have strong market power to manipulate prices. The “winner-takes-all” principle applied in

the procurement may further increase the market power of winning manufacturers by expanding their

respective market shares. They may take the advantage of the market power to increase drug prices in the

long-run. The continuously lowering price-caps may force the losing bidders to exit the market. A careful assessment of the unintended consequences of the collective procurement is warranted.

Item Type: Article
Schools/Departments: University of Nottingham Ningbo China > Faculty of Humanities and Social Sciences > School of Economics
Identification Number: https://doi.org/10.7189/JOGH.10.010314
Depositing User: QIU, Lulu
Date Deposited: 28 Aug 2020 02:03
Last Modified: 28 Aug 2020 02:03
URI: http://eprints.nottingham.ac.uk/id/eprint/61480

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