How does the pharmaceutical industry influence prescription? A qualitative study of provider payment incentives and drug remunerations in hospitals in Shanghai

Wei Yang

Health Economics, Policy and Law, 2016, vol. 11, issue 4, 379-395

Abstract: Over-prescription has become one major problem in China’s health care sector. Incorporating interview data from hospitals in Shanghai, this paper provided empirical evidence on how the process of over-prescription was carried out in day-to-day clinical settings, and demonstrates various mechanisms that allow over-prescription to continue vigorously in the context of the Chinese health care system. In particular, this study identified four levels of incentives that over-prescription was carried out: hospital, medical department, doctors and pharmaceutical companies. Due to the insufficient funding from the government and rising operational costs, hospitals had to rely on the sales of drugs and provision of medical services to survive. This funding pressure then transferred to specific revenue targets for medical departments. A combination of incentives, including drug remunerations, bonus system, low pay and high workloads motivated over-prescription at doctor level. At pharmaceutical company level, high profits of pharmaceuticals products as well as lack of emphasis on efficacy of drugs led to under-table payments and illicit drug remunerations. The study argued that the way that the Chinese health care system operates was based on the profit-seeking principle rather than on fulfilling its social functions, and called for a systematic reform of provider incentives to eradicating the problem of over-prescription.

Date: 2016
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