China’s volume-based drug procurement linked to modest rise in R&D intensity

China's national volume-based drug procurement (VBP) policy, designed to cut drug prices, relieve pressure on medical insurance funds and standardize drug distribution, may be associated with a modest increase in research and development intensity among the pharmaceutical manufacturers it directly affects. The authors identified the year in which each firm's products were first selected in a nationally centralized VBP batch and applied a staggered difference-in-differences design using Callaway and Sant'Anna estimation methods to compare R&D intensity before and after selection. The headline estimate was positive: direct VBP selection was associated with higher R&D intensity, with an average treatment effect on the treated of 0.03679 (95% confidence interval 0.00340 to 0.07018).

The authors interpreted this as an association rather than definitive proof of a causal effect, and their credibility checks returned mixed results. A parallel-trends test based on group-time estimates did not reject the identifying assumption, but an alternative test using an event-study approach did reject it, and the main estimate weakened when the authors applied winsorization to limit the influence of extreme values or imposed stricter requirements on control-group composition. Supplementary analyses further complicated the picture.

Measures of research personnel inputs did not corroborate an expansion of research activity. Taken together, the authors concluded that the observed rise in R&D intensity should be interpreted cautiously and may reflect how intensity is measured rather than a broad-based shift in research investment. The study also tested whether the association differed by firm characteristics, examining state-owned versus private firms, firms in regions with higher or lower marketization, and firms with different pre-policy marketing intensity.

None of these subgroup comparisons produced statistically significant differences, suggesting the average association was not clearly concentrated in particular types of firms or regions within the sample. The authors framed VBP as more than a cost-containment instrument, arguing that by reshaping competitive dynamics in the pharmaceutical market it may influence firms' innovation incentives. They recommended that policymakers consider VBP's effects on R&D when refining procurement design, balancing price reduction with quality assurance and support for innovation.

Subject of Research: Association between China's volume-based drug procurement policy and R&D intensity among listed pharmaceutical manufacturers

Article Title: Volume-based drug procurement and pharmaceutical firms’ R&D intensity: evidence from Chinese a-share listed manufacturers

Article References: Hao, T., & Feng, X. (2026). Volume-based drug procurement and pharmaceutical firms’ R&D intensity: evidence from Chinese a-share listed manufacturers. BMC Health Services Research. https://doi.org/10.1186/s12913-026-15946-5

Image Credits: AI Generated

DOI: 10.1186/s12913-026-15946-5

Keywords: volume-based drug procurement, China, pharmaceutical industry, R&D intensity, difference-in-differences, health policy, drug pricing, A-share listed firms, cost containment, pharmaceutical innovation, BMC Health Services Research, Volume-based