Data and Code for: Competitive Bidding in Drug Procurement: Evidence from China

Principal Investigator(s):  View help for Principal Investigator(s) Shengmao Cao, Northwestern University; Lisa Xuejie Yi, Stanford University; Chuan Yu, Stanford University

Version:  View help for Version V1

Name File Type Size Last Modified
  replication 02/19/2024 06:07:PM

Project Citation: 

Cao, Shengmao, Yi, Lisa Xuejie, and Yu, Chuan. Data and Code for: Competitive Bidding in Drug Procurement: Evidence from China. Nashville, TN: American Economic Association [publisher], 2024. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2024-07-02. https://doi.org/10.3886/E193165V1

Project Description

Summary:  View help for Summary We study the equilibrium effects of introducing competitive bidding in drug procurement. In 2019, China introduced a competitive bidding program where drug companies bid for a prespecified procurement quantity in nine provinces. Using a difference-in-differences design, we show that the program reduced average drug prices by 47.4%. Generic drugs won most bids and cut prices by 75.0%. We develop an equilibrium model to quantify the trade-off between lower prices and potential choice distortions. Competitive bidding increases consumer welfare if policymakers believe consumers should value branded and bioequivalent generic drugs equally. The program also reduced government expenditure on insurance by 19.8%.

Scope of Project

Subject Terms:  View help for Subject Terms competitive bidding; procurement auctions; drug prices; consumer welfare
JEL Classification:  View help for JEL Classification
      D12 Consumer Economics: Empirical Analysis
      D22 Firm Behavior: Empirical Analysis
      I11 Analysis of Health Care Markets
      I18 Health: Government Policy; Regulation; Public Health
      L13 Oligopoly and Other Imperfect Markets
      L65 Chemicals; Rubber; Drugs; Biotechnology; Plastics
Geographic Coverage:  View help for Geographic Coverage China
Time Period(s):  View help for Time Period(s) 2012 – 2019
Collection Date(s):  View help for Collection Date(s) 2019 – 2019
Universe:  View help for Universe 31 drug molecules covered by the competitive bidding program and 24 provinces in China from 2012 to 2019.
Data Type(s):  View help for Data Type(s) administrative records data; aggregate data; program source code

Methodology

Data Source:  View help for Data Source Wind Medical Database
Defined Daily Dose (DDD) from World Health Organization (WHO)
National Medical Products Administration of China
Unit(s) of Observation:  View help for Unit(s) of Observation Product-quarter-province
Geographic Unit:  View help for Geographic Unit Province

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Published Versions

V1 [2024-07-02]

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