# Intended and Unintended Impacts of ‘4+7’ Volume-Based Drug Procurement on the Use of Drugs in China: A Natural Experimental Study

## TL;DR

This study examines how a drug procurement policy in China affected drug use, finding both intended benefits and unintended consequences.

## Contribution

The study provides empirical evidence on the impacts of volume-based drug procurement in China, including unintended increases in original drug use.

## Key findings

- The policy increased the use of bid-winning and generic drugs while reducing expenditures on policy-list drugs.
- Unintended increases in original drug use were observed in city-level hospitals.
- City-level hospitals showed greater changes in drug volume and expenditure compared to county-level hospitals.

## Abstract

Background: Volume-based drug procurement is regarded as a pharmaceutical cost-containment measure in healthcare provision globally. The Centralized Volume-Based Drug Procurement (CVBDP) launched in March 2019 in China, also known as the ‘4+7’ policy. 11 cities, including Xi’an city in Shaanxi Province, were set up as pilots. This study aims to examine the intended and unintended impacts of the ‘4+7’ policy on the use of original and generic drugs in city-level and county-level hospitals in Shaanxi, China. Methods: The data used in this study came from the Shaanxi Drug and Apparatus Centralized Procurement Platform (SDACPP). In total, 111,999 drug procurement order records of 118 policy-related drugs (including 25 ‘4+7’ policy-list drugs and 93 alternative drugs by generic name) from April 2017 to November 2019 were included in analyses. Policy-list drugs were divided into bid-winning and non-winning drug products. The volume and the expenditure of the drugs served as the outcome variables, measured by Defined Daily Doses (DDDs) and Chinese yuan (CNY), respectively. A difference-in-differences (DID) approach was used to estimate the policy’s net effect. Results: After the ‘4+7’ policy, the volume of bid-winning, policy-list, and policy-related drugs increased. An unexpected increase in volume was observed among alternative drugs, especially original drugs in city-level hospitals. The expenditure of policy-list and non-winning drugs declined, whereas that of alternative drugs unanticipatedly increased. Changes in volume and expenditure were both greater in generic drugs and in city-level hospitals, compared to their original and county-level hospital counterparts. Conclusions: Our findings highlight the positive effects of the ‘4+7’ policy on generic drug substitution and pharmaceutical expenditure containment, which are greater in city-level hospitals. The unanticipatedly incremental volume of original drugs in city-level hospitals suggests the potential risk of the poor quality of bid-winning drugs, lower compliance with bid-winning drugs among patients, or physicians’ profit-seeking behaviors in urban areas. More regulations and supervisions for the prescription and financial incentives of physicians are needed to address these concerns.