The Impact of the Consistency Evaluation Policy of Generic Drugs on R&D Investment Intensity of Pharmaceutical Companies—An Empirical Study Based on the Difference-in-Differences Model

Abstract

In 2016, China began to execute the consistency evaluation policy of generic drugs. Many scholars believed that the policy would stimulate pharmaceutical firms to increase R&D investment with a theoretical perspective, but few have conducted empirical studies. Therefore, we conduct a difference-in-differences (DID) model and use panel data of 111 A-share listed pharmaceutical firms from 2012 to 2020 to empirically study the impact of the consistency evaluation policy of generic drugs on pharmaceutical firms' R&D investment intensity. The result shows that the policy has a significant positive impact on the R&D investment intensity of firms with chemical generics, robust under the test for parallel trend test, placebo test, and the propensity score matching and difference-in-differences (PSM-DID) test. In addition, we further analyzed the impact of this policy on the R&D intensity of pharmaceutical firms according to the heterogeneity of enterprise's operational nature, regional distribution and profitability. From the perspective of time changes and the average effect, the R&D investment intensity of private pharmaceutical firms is more affected by the policy than state-owned enterprises; the R&D investment intensity of pharmaceutical firms in the eastern region is more affected by this policy than those in the central and the western; the R&D investment intensity of high-profitability pharmaceutical firms is more affected by the policy than those with low-profitability. The consistency evaluation policy is still being implemented, and its impact on pharmaceutical firms needs to be studied from different empirical research perspectives in the future.

Has the consistency evaluation policy of generic drugs promoted the innovation quality of Chinese pharmaceutical manufacturing industry? An empirical study based on the difference-in-differences model

“…Therefore, with the in-depth promotion of generic drug consistency evaluation, the future market pattern of China's pharmaceutical manufacturing industry will move towards the development direction of high-end generic drugs and original, innovative drugs (17,18). The Chinese government has put forward the goal of "promoting high-quality economic development" (19) and pointed out that innovation is the most important driving force to lead economic development.…”

“…In the existing related studies, some scholars have theoretically proposed that the generic consistency evaluation policy can promote pharmaceutical enterprises to increase R&D investment (18,20,21), and some scholars have suggested that the implementation of generic consistency evaluation can encourage the transformation of China's pharmaceutical industry from imitation to innovation (22,23). However, there needs to be more relevant research on whether this policy improves the overall innovation quality of China's pharmaceutical manufacturing industry.…”

“…To reduce the impact of factors other than the core explanatory variables on the explanatory variables, and regarding the research methodology of the existing literature (18,(36)(37)(38), this paper selects seven firm-level influences as a combination of control variables, including firm size, capital structure, firm solvency, firm profitability, firm growth, equity concentration, and firm market competitiveness.…”