Did the universal zero-markup drug policy lower healthcare expenditures? Evidence from Changde, China

Abstract

Background The zero-markup drug policy (also known as the universal zero-markup drug policy (UZMDP)) was implemented in stages beginning with primary healthcare facilities in 2009 and eventually encompassing city public hospitals in 2016. This policy has been a central pillar of Chinese health reforms. While the literature has examined the impacts of this policy on healthcare utilization and expenditures, a more comprehensive and detailed assessment is warranted. The purpose of this paper is to explore the impacts of the UZMDP on inpatient and outpatient visits as well as on both aggregate healthcare expenditures and its various components (including drug, diagnosis, laboratory, and medical consumables expenditures). Methods A pre-post design was applied to a dataset extracted from the Changde Municipal Human Resource and Social Security Bureau comprising discharge data on 27,246 inpatients and encounter data on 48,282 outpatients in Changde city, Hunan province, China. The pre-UZMDP period for the city public hospitals was defined as the period from October 2015 to September 2016, while the post-UZMDP period was defined as the period from October 2016 to September 2017. Difference-in-Difference negative binomial and Tobit regression models were employed to evaluate the impacts of the UZMDP on healthcare utilization and expenditures, respectively. Results Four key findings flow from our assessment of the impacts of the UZMDP: first, outpatient and inpatient visits increased by 8.89 % and 9.39 %, respectively; second, average annual inpatient and outpatient drug expenditures fell by 4,349.00 CNY and 1,262.00 CNY, respectively; third, average annual expenditures on other categories of healthcare expenditures increased by 2,500.83 CNY, 417.10 CNY, 122.98 CNY, and 143.50 CNY for aggregate inpatient, inpatient diagnosis, inpatient laboratory, and outpatient medical consumables expenditures, respectively; and fourth, men and older individuals tended to have more inpatient and outpatient visits than their counterparts. Conclusions Although the UZMDP was effective in reducing both inpatient and outpatient drug expenditures, it led to a sharp rise in other expenditure categories. Policy decision makers are advised to undertake efforts to contain the growth in total healthcare expenditures, in general, as well as to evaluate the offsetting effects of the policy on non-drug components of care.

The impact of zero markup drug policy on patients' healthcare utilization and expense: An interrupted time series study

“…Consistent with previous studies ( 2 , 31 ), the results showed that the number of inpatient admissions with LC increased after the ZMDP, which suggested the ZDMP promoted inpatient service utilization to an extent. Of note, some studies have shown that hospitals may increase revenue by increasing the number of medical consumables, imaging, and laboratory tests to offset the decline in drug expenditure ( 2 , 11 , 17 , 18 , 32 ). However, we found no indication that the ZMDP was associated with the increase in consumables, imaging, and laboratory test usage for inpatients diagnosed with IHD, CRF, or LC.…”

“…The results indicate that the western drug expenses decreased significantly and service expenses increased significantly after the intervention. It was seen in most studies that after the elimination of drug markups, there was a significant reduction in drug expenses ( 2 , 3 , 15 , 17 , 30 ). In this reform, the prices of medical service items such as surgical operations and traditional Chinese medicine services that involved both higher skilled and more intensive labor input were raised, which more properly reflect the professional value and contribute to building a sustainable healthcare system ( 10 ).…”

“…However, the Chinese government was unable to sustain such a heavy financial burden for a long period. Since 1950, a 15% makeup on the price of drugs had been allowed ( 2 , 3 ). After the economic reform in the early 1980s, the proportion of direct government financing dropped to an average of <10% of public hospital budgets, which created significant self-funding financial pressures within public hospitals.…”

Editorial: Contemporary Medicine: Making Sense of Implementation Models and Methods

“…The zero-markup policy for essential drugs, a central point of the Chinese health reform started in 2009 ( 7 ), plays an important role in decreasing the cost of drugs for chronic diseases, such as type 2 diabetes, hypertension, metabolic syndrome, coronary heart disease, and cancer; Liu et al in their systematic review discuss the effects of this policy on healthcare costs and utilization in China in the years 2015–2021 supporting a lower drug cost to patients but a rise in other expenditure categories such as healthcare services “induced” by physicians or response to unmet needs in the population.…”

The impact of comprehensive public hospital reforms on the direct medical cost of inpatients with coronary heart disease

“…But some studies found that although drug markups were abolished, doctors in public hospitals in China still had an incentive to prescribe more drugs (8). Other studies showed that although hospital drug revenue was reduced, it led to a rise in other revenue categories, such as diagnostics, laboratory tests, and medical consumables (9,10).…”