Medical service pricing and pharmaceutical supply chain coordination contracts under the zero-markup drug policy

Abstract

To implement state policies of zero-markup drug policy and medical service fee adjustment for public hospitals, this study constructed game models of the pharmaceutical supply chain, consisting of a drug supplier and a public hospital. The study obtained the optimal medical service level and pricing under the new state drug policies. In addition, it analyzed the impacts of the degree of public benefit of hospitals on the medical service level, the medical service price, and the drug price. Finally, from the perspective of cooperation between drug suppliers and public hospitals, the specialized coordination contract was designed to maximize overall social welfare. This study found an anomalous but meaningful conclusion: in the background of the zero-markup drug policy, a higher public benefit of hospitals could increase the drug prices, but it could reduce the medical service prices further to cut down on the overall treatment fees for the patients. The novel coordination contract can optimize the pharmaceutical supply chain and achieve a win-win situation for the drug suppliers, public hospitals, and patients. When the public benefit of hospitals is higher, the profit of a decentralized decision-making supply chain is greater than a centralized one, while the pharmaceutical supply chain will not coordinate itself.

Management of drug supply chain information based on “artificial intelligence + vendor managed inventory” in China: perspective based on a case study

“…In order to address high medical costs for the general public and excessively high drug prices in China, the zero-markup drug policy was implemented in 2017 for hospital sales. This reform promotes the separation of medicine provision from healthcare services ( Zhou et al, 2023 ). Eliminating markups on drugs has led to changes in revenue structure for public hospitals, with drug procurement expenses becoming a significant component of their expenditures ( Deng et al, 2018 ).…”