The Impact of Two-Invoice System on Pharmaceutical Manufacturers’ Selling Expenses in China: A Difference-In-Differences Approach

Nhat Chi Mai

No 68fsb, OSF Preprints from Center for Open Science

Abstract: A perennial question for the pharmaceutical industry has been excessive drug prices. To alleviate patients’ burden of expensive medical bills and increase the affordability of medicines, China adopted the Two-Invoice System (TIS) in drug procurement for public medical institutions in 2017. In this paper, we study the impact of the TIS on pharmaceutical manufacturers’ selling expenses. Using a Difference-in-Differences (DID) methodology and a sample of the A-share pharmaceutical manufacturing firms listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange from the years 2014 to 2020, we find that the TIS leads to a significant increase in pharmaceutical manufacturers’ selling expenses but gradually weakens over time. In addition, we further explore whether the impact of the TIS on pharmaceutical manufacturers’ selling expenses is affected by the pharmaceutical manufacturers’ previous drug circulation mode. The results indicate that the TIS could significantly increase the pharmaceutical manufacturers’ selling expenses in the agency mode group. However, there is no evidence to support the TIS having the same effect in the direct sales office model group.

Date: 2022-04-05
New Economics Papers: this item is included in nep-hea
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:68fsb

DOI: 10.31219/osf.io/68fsb

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