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

Yi Ran, Yuanyuan Hu, Shouming Chen, Fangjun Qiu and Ahmed Rabeeu
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Yi Ran: School of Economics and Management, Tongji University, Shanghai 200092, China
Yuanyuan Hu: School of Economics and Management, Tongji University, Shanghai 200092, China
Shouming Chen: School of Economics and Management, Tongji University, Shanghai 200092, China
Fangjun Qiu: School of Economics and Management, Tongji University, Shanghai 200092, China
Ahmed Rabeeu: School of Economics and Management, Tongji University, Shanghai 200092, China

IJERPH, 2022, vol. 19, issue 7, 1-18

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.

Keywords: two-invoice system; pharmaceutical industry; pharmaceutical manufacturers’ selling expenses; drug distribution; DID (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
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