Influence of Chinese National Centralized Drug Procurement policy on pharmaceutical corporate R&D investment

Hang Liu and Xinglong Fang

Applied Economics, 2025, vol. 57, issue 13, 1395-1414

Abstract: The Chinese National Centralized Drug Procurement (CNCDP) policy has dramatically changed the Chinese drug market and influenced the production and R&D behaviour of pharmaceutical companies. This study empirically examined the impact of the CNCDP policy on pharmaceutical enterprises’ R&D investment and its mechanism using the difference-in-differences (DID) estimation. The findings demonstrate that this policy has a significant positive impact on corporate R&D investment. Moreover, selling expenses and accounts receivable play a crucial mediating role between them. However, there is no corresponding increase in the patent output of pharmaceutical enterprises. Heterogeneity analysis reveals that the policy exerts a more substantial influence on non-state-owned enterprises (non-SOEs) and chemical drug manufacturers than on state-owned enterprises (SOEs) and comprehensive firms. Therefore, it is recommended that the government continue to implement procurement policies, combat medical corruption, urge hospitals to pay promptly for medicines, broaden the scope of procured medicines, and promote the conversion of companies’ R&D investment into high-quality outcomes. These findings offer valuable guidance for developing countries in formulating policies to bolster the R&D competitiveness of their pharmaceutical industries and secure the supply of medicines.

Date: 2025
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DOI: 10.1080/00036846.2024.2399818

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