“The biggest reform to China's health system”: did the zero-markup drug policy achieve its goal at traditional Chinese medicines county hospitals?

Abstract

The zero-markup drug policy (ZMDP) was heralded as the biggest reform to China’s modern health system. However, there have been a very limited number of investigations of the ZMDP at county hospital level, and those limited county hospital studies have several limitations in terms of sample representativeness and study design. We investigated the overall and dynamic effects of ZMDP at traditional Chinese medicine (TCM) county hospitals. We obtained longitudinal data from all TCM county hospitals in 2004–16 and the implementation year of ZMDP for each hospital. We used differences-in-difference methods to identify the overall and dynamic effects of ZMDP. On average, the ZMDP reform was associated with the reduction in the share of revenue from drug sales (3.1%), revenue from western medicines sales (12.7%), revenue from medical care services (3.6%) and gross hospital revenue (3.4%), as well as increased government subsidies (24.4%). The ZMDP reform was not significantly associated with the number of annual outpatient and inpatient visits. In terms of dynamic effects, the share of revenue from drug sales decreased by 2.5% in the implementation year and by about 5% in the subsequent years. Revenue from western medicine sales fell substantially in the short term and continued to drop in the long term. Government subsidies went up strikingly in the short term and long term, and revenue from medical care services and gross revenue decreased only in the implementation year. The ZMDP achieved its stated goal through reducing the share of revenue from drug sales without disrupting the availability of healthcare services at TCM county hospitals. The success of ZMDP was mainly due to the huge growth in the government’s financial investment in TCM hospitals.

Different Impacts of the zero-markup drug policy on county general and traditional Chinese medicine hospitals: Evidence from Shandong province, China

“…According to the goal of the ZMDP, the outcome variables in this study were revenue from medicine sales, the share of revenue from medicine sales (divide the amount of revenue from medicine by total revenue except government subsidies), revenue from medical care services, government subsidies, which reflected the structure of the revenue of county hospitals [7,11,14]. The outcome variables also included revenue and expenditure surplus, gross revenue, the number of annual outpatient and inpatient visits, which reflected the impacts of the policy on the overall operation of county hospitals.…”

“…The Chinese government launched a new round of health reform in 2009, aiming to achieve the universal health coverage by 2020. The zero-markup drug policy(ZMDP), as the key part of the reform [6], is considered as a key measure to address over prescriptions of drugs through removing drug markups for revenue generation for healthcare providers [7]. The ZMDP refers to the removal of 15% profit margins of drug sales at public health care facilities that had been used as one of sources for financing those health providers over a half century [6,8].…”

“…The ZMDP refers to the removal of 15% profit margins of drug sales at public health care facilities that had been used as one of sources for financing those health providers over a half century [6,8]. The purpose of the ZMDP is to reduce patients' financial burden and change the profit-seeking behaviors of public health care institutions [7]. In the county level, health care is delivered via a three-tiered system [9], comprising village clinics, township health centers and county hospitals.…”

“…The ZMDP was first implemented at primary care institutions in 2010, then expanded to county public hospitals in 2012, and then expanded to all county public hospitals in 2015 in Shandong Province, one of the most populated provinces in China. The ZMDP was not applied to herbal medicines to support the utilization of the TCM [7,11], which implied that the policy may exert different impacts between county general and TCM hospitals.…”

“…Some studies have examined the effects of the ZMDP. One study compared the different impacts of the ZMDP on western medicines and Chinese medicines in county TCM hospitals [7], but it still did not compare the difference between county general and TCM hospitals. Furthermore, for policy-makers and similar settings where the traditional medicine plays an important role in their health system, it is important to know the difference in the impacts of the ZMDP between county general and TCM hospitals.…”