Impacts of regulated competition on pricing in Chinese pharmaceutical market under urban employee basic medical insurance

ABSTRACT

Background: Examine the effects of regulated competition on the drug pricing in China.

Methods: Based on product-level data, a regression method was employed for pricing by using data from Tianjin Urban Employee Basic Medical Insurance (UEBMI) database. The market competition measures distinguished generic competition within the same molecule from therapeutic competition within the same therapeutic class.

Results: The increases in pricing are inversely related to the number of generic competitions. The generic sub-group results vary from the originator sub-group. For the generics, generic competition has a significantly reduced effect on the price; however, only therapeutic competition has a significantly reduced effect on the originator price.

Conclusions: Regulated competition has a positive role in shaping the pharmaceutical market. Furthermore, regulated competition affects the price differently for the sub-groups. The promotion of competition between generic and originator in order to reap full competition benefit and reduce frictions among policies are necessary.

KEYWORDS:

• Competition
• regulation
• price
• pharmaceutical market
• China

Declaration of interest

The authors declare that the funder had no role in the study. The authors have no relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties.

Notes

1. The UEBMI system, which was established in 1998, is one of the three basic medical insurance systems in China. Mandatory participation is planned for all employees in formal sector. The urban reimbursement drug list covers about 20% of all products by quantity on the market and 60% by sales. The other two government-run medical insurances are Urban Residence Basic Medical Insurance (URBMI) and New Rural Cooperative Medical Insurance (NRCMI).

2. Unlike US pharmaceutical market, the Chinese UEBMI pharmaceutical market is not a free market since the prices have been strictly regulated. Thus, the market competition is a regulated competition if it occurs in China.

3. Originator refers to a research-based, patentable product sold by the originating company, regardless of whether or not the product has a patent in a given market. Generic refers to all other drugs which do not belong to the originator.

4. Quality evaluation criterion include the status of the new drug (famous drug), originator or generic; Good Manufacturing Practice (GMP) standards.

5. For drugs without ATC code, self-administered analogous ATC codes were made according to their chemical subgroup. There are 10 analogous ATC codes added by the author in our sample including C01BG08, C01DA80, C01DA81, C01DX20, C01DX22, C01DX55, C01DX56, C02NA01, C07AG03, and C08CA17.

6. In case of drugs not listed on the ATC, <New Pharmaceutics> was used to calculate the DDD; or the drug pamphlet if the drug was also missed by <New Pharmaceutics>.

7. The average exchange rate was around US$ 1 to CNY 6.83 in 2008–2010.

Additional information

Funding

The authors were funded by the National Natural Science Foundation of China [grant 71203155] and Tianjin Research Program of Application Foundation and Advanced Technology of Tianjin Municipal Science and Technology Commission [grant 15JCQNJC12600].