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The impact of China’s National Drug Centralized Procurement Policy on pharmaceutical firm innovation: evidence from a staggered difference-in-differences analysis
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DOI：10.1080/20523211.2026.2680235.png)
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Abstract
En 中文
China's National Drug Centralized Procurement Policy (NDCPP) aims to reduce drug prices through a ‘price-for-volume’ mechanism. While effective in cost containment, its impact on pharmaceutical firms’ innovation remains debated, with existing studies often focusing on short-term or static effects.
This study utilises an unbalanced panel of 160 listed Chinese pharmaceutical firms from 2015 to 2023. We employ a multi-period staggered difference-in-differences (DID) model to identify the causal impact of the NDCPP on innovation input (R&D investment intensity) and output (authorised invention patents). Mediation models are constructed to test the roles of cost and operational efficiency.
Baseline estimates indicate that the NDCPP significantly increases innovation activities. The implementation of the NDCPP led to an increase in innovation input by 0.0118 units (representing a 1.18 percentage point increase in R&D intensity, or a 22.06% increase relative to the mean) and innovation output by 0.847 units (representing an average annual increase of 0.847 authorised invention patents per firm, or a 14.20% increase relative to the mean). Dynamic analyses reveal an immediate response and continuous enhancement, with promotional effects strengthening from the first to fourth years after policy implementation respectively. Mediation analyses show that cost efficiency significantly mediates innovation output, while strategic inventory management mediates R&D investment. Heterogeneity analyses demonstrate strong responses among private, large, and chemical pharmaceutical firms, with traditional Chinese medicine (TCM) firms also showing significant gains in innovation input.
The result indicates a strategic reorientation of pharmaceutical firms, incentivizing a resource reallocation from marketing activities toward substantive R&D activities. The ‘price-for-volume’ effect offsets price deductions through rapid reorganisation of resources. Future policies should consolidate this momentum and guide enterprises toward high-quality, sustainable innovation.
Keywords:
China’s National Drug Centralized Procurement Policy
pharmaceutical firm
innovation
staggered DID model
mediation analyses
heterogeneity analyses
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