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Drug Pricing Pattern in China: Dilemma and Countermeasure

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Abstract

Maybe it is the most important medical reform for current China to adopt the bid-and-procurement scheme to correct the distortion of pharmaceutical resources allocation. Nevertheless, overpriced drugs often happen. This article aims to identify potential factors leading to the overpriced. Based on the mechanism rules of the scheme, it is found that unethical doctors are crucial to high price markup in the pricing pattern of drugs. Under China's actual conditions, asymmetric ownership is identified to be another cause of the overpriced by developing an asymmetric bidding model. How are the impacts of these two factors to be alleviated? Upon examination, several reform measures cannot effectively avoid the occurrence of the overpriced. Yet, the issue is very urgent for China because it is facing with the problem of population aging. Therefore, alternative options - a regulation-penalty tool and an investment subsidy policy - are proposed to improve China's health care.

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Acknowledgments

We are indebted to two anonymous referees for their help to improve the quality of the paper and Prof. Shouyang Wang for encouragement and detailed comments on an earlier draft. During this research, we have benefited from the financial support of National Natural Science Foundation of China (No. 71471039) and CityU 11301014 of the Government of Hong Kong SAR.

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Authors and Affiliations

  1. School of International Trade and Economics, University of International Business and Economics, Beijing, 100029, China

    Mingxi Wang

  2. School of Economics and Management, University of Chinese Academy of Sciences, Beijing, 100190, China

    Yi Hu & Han Qiao

  3. Department of Systems Engineering and Engineering Management, City University of Hong Kong, Kowloon, Hong Kong

    Chuangyin Dang

Authors
  1. Mingxi Wang
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  2. Yi Hu
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  3. Han Qiao
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  4. Chuangyin Dang
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Correspondence to Yi Hu.

Additional information

Mingxi Wang Prof. Mingxi Wang received his PhD degree in economics from University of International Business and Economics in 2009, MSc degree in applied mathematics from Anhui Normal University in 2005 and BSc degree in mathematical education from Anhui Normal University in 2002. He is currently Professor of Quantitative Economics at University of International Business and Economics, China. Prior to this, he has worked as a Senior Research Fellow at City University of Hong Kong. He is good at mathematical modelling and microeconomics analysis. The primary areas that are interested in are auction theory and its applications in economics and carbon trading market microstructure in China. To date, Prof. Wang has published over 40 papers in journal including Economics Letters, Energy Policy, The World Economy, Journal of System Sciences and Complexity, Applied Economics letters.

Yi Hu is currently an associate professor in School of Economics and Management at University of Chinese Academy of Sciences, China. He received his PhD degree from Sun Yat-sen University in 2011 and BSc degree from South China University of Technology in 2006. His research interests include econometric theory, applied econometrics and system engineering. Up to now, Hu has published more than 50 papers in journal.

Han Qiao is currently an associate professor in School of Economics and Management at University of Chinese Academy of Sciences, China. She received her PhD degree from Academy of Mathematics and Systems Science of Chinese Academy of Sciences in 2012 and BSc degree from Qingdao University in 2000. Her research interests include game theory and its applications. Up to now, Qiao has published more than 40 papers in journal.

Chuangyin Dang Prof. Chuangyin Dang received his PhD degree in operations research/mathematical economics from Tilburg University of the Netherlands in 1991, MSc degree in Applied Mathematics from Xidian University of China in 1986 and BSc degree in Computational Mathematics from Shanxi University of China in 1983. He is currently Professor of systems engineering and engineering management at City University of Hong Kong. Prof. Dang’s research focuses on systems modeling, analysis and optimization. He is best known for the developments of the D1-triangulation of the Euclidean space and fixed-point iterative methods for integer programming. Due to his significant contributions, Prof. Dang received the award of outstanding research achievements of the year from Tilburg University of The Netherlands in 1990.

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Wang, M., Hu, Y., Qiao, H. et al. Drug Pricing Pattern in China: Dilemma and Countermeasure. J. Syst. Sci. Syst. Eng. 27, 340–366 (2018). https://doi.org/10.1007/s11518-018-5373-9

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  • DOI: https://doi.org/10.1007/s11518-018-5373-9

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