Differential effect of China’s Zero Markup Drug Policy on provider-induced demand in secondary and tertiary hospitals
Bibliographic Data
| ID | 22086619 |
|---|---|
| Authors | Xiaoxi Zhang (0000-0002-8726-9859, Shanghai Jiao Tong University), Armand Zimmerman (0000-0002-1216-581X, Duke University), Hongyu Lai (0009-0003-8648-5773, Fudan University), Yanyan Zhang (0000-0002-0933-3253, Hohai University), Zhongyi Tang, Zhong-Yi Tang (Shanghai Municipal Commission of Health and Family Planning), Shenglan Tang (0000-0001-5727-078X, Duke University), Osondu Ogbuoji (0000-0003-2472-6861, Duke University, corresponding author) |
| Year | 2024 |
| Volume | 12 |
| Pages | 1229722-1229722 |
| Publication date | 2024-04-24 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Frontiers in Public Health (JOURNAL) |
| Journal identifiers | ISSN: 2296-2565 • E-ISSN: 2296-2565 |
| Publisher | Frontiers Media SA (PUBLISHER • CH) |
| DOI | 10.3389/fpubh.2024.1229722 |
| PMID | 38721544 |
| OpenAlex | W4395079148 |
| Language | EN |
| Citations received | 2 |
| References cited | 26 |
Following the marketization of China’s health system in the 1980’s, the government allowed public hospitals to markup the price of certain medications by 15% to compensate for reduced revenue from government subsidies. This incentivized clinicians to induce patient demand for drugs which resulted in higher patient out-of-pocket payments, higher overall medical expenditure, and poor health outcomes. In 2009, China introduced the Zero Markup Drug Policy (ZMDP) which eliminated the 15% markup. Using Shanghai as a case study, this paper analyzes emerging and existing evidence about the impact of ZMDP on hospital expenditure and revenue across secondary and tertiary public hospitals. We use data from 150 public hospitals across Shanghai to examine changes in hospital expenditure and revenue for various health services following the implementation of ZMDP. Our analysis suggests that, across both secondary and tertiary hospitals, the implementation of ZMDP reduced expenditure on drugs but increased expenditure on medical services, exams, and tests thereby increasing hospital revenue and keeping inpatient and outpatient costs unchanged. Moreover, our analysis suggests that tertiary facilities increased their revenue at a faster rate than secondary facilities, likely due to their ability to prescribe more advanced and, therefore, more costly procedures. While rigorous experimental designs are needed to confirm these findings, it appears that ZMDP has not reduced instances of medical expenditure provoked by provider-induced demand (PID) but rather shifted the effect of PID from one revenue source to another with differential effects in secondary vs. tertiary hospitals. Supplemental policies are likely needed to address PID and reduce patient costs
Business · Economics · Public economics · Public health · Revenue · Subsidy · Global Maternal and Child Health · Healthcare Policy and Management · Healthcare Systems and Reforms · Medicine · Nursing · Finance
Privatization and Its Discontents — The Evolving Chinese Health Care System
Realignment of incentives for health-care providers in China
Tackling the challenges to health equity in China
Reform of how health care is paid for in China
Towards universal health coverage
An evaluation of systemic reforms of public hospitals
Can zero-markup policy for drug sales in public hospitals resolve the problem of ‘seeing a doctor is too expensive’ in China? A case study of four municipal general tertiary hospitals at H City in Z Province
Intended and unintended impacts of price changes for drugs and medical services
| Citations per year | 2 |
|---|---|
| Citation span | 2025 - 2025 (1) |
| Highly cited | No |