# Impact of National Drug Price Negotiation policy on the innovation performance of biopharmaceutical industry in China

## TL;DR

A study finds that China's drug price negotiation policy boosted biopharmaceutical firms' R&D and patents, though growth effects were limited.

## Contribution

This study provides firm-level evidence on how China's drug price negotiation policy affects biopharmaceutical innovation.

## Key findings

- Firms with negotiated drugs increased R&D investment and patent applications.
- Overall growth scores showed no significant short-term improvement.
- Results were confirmed using PSM-DID and robustness tests.

## Abstract

The National Drug Price Negotiation (NDPN) policy is a key institutional reform in China that reshaped drug market access rules. While its effects on drug prices and accessibility are well documented, evidence on firm-level innovation performance remains limited. This study evaluates the impact of the 2019 NDPN on the innovation performance of Chinese biopharmaceutical firms.

We used quarterly panel data from 96 listed biopharmaceutical firms from 2018 Q1 to 2023 Q4. A difference-in-differences (DID) model combined with propensity score matching (PSM-DID) was employed to identify causal effects. Innovation performance was measured by R&D investment, patent application count, and overall growth score, with firm- and time-fixed effects as well as financial controls included. Robustness was assessed through parallel trend and placebo tests.

DID estimates show that firms with NRDL-included drugs significantly increased R&D investment (coefficient = 0.733) and patent application count (coefficient = 0.362). Overall growth score showed no short-term change. PSM-DID confirmed these findings, with R&D investment (coefficient = 0.693) and patent application count (coefficient = 0.272) both significantly improved.

The NDPN policy significantly enhanced firms’ innovation performance by increasing R&D investment and patent applications, though its effect on overall growth remains limited in the short term. These findings provide firm-level evidence that NDPN strengthens innovation incentives in China’s biopharmaceutical industry.