An Empirical Study On The Implementation Effect Of The Zero-markup Policy On Essential Medicines In Village Clinics

The rapidly growing health care expenditure has emaciated the efficiency of China’s health system.The main cause resulting this great burden is the escalation of drug expenditures.After the market-oriented reform in health sector in 1980s,markup on drugs was legalized by the government to maintain the operation of healthcare facilities with a significantly decrease in the proportion of support from the government subsidy.Facing drug markup and driven by financial incentives,providers tend to prescribe overly or unnecessary drugs,and more expensive drugs to gain profits.In order to control the irrational drug use,in the year of 2009,the national wide essential medicine policy has been implemented.The key of the policy was zero markup drug policy,which required that the additional markup for the essential drugs should be gradually removed from drug sales in primary health sector.After implementation of zero markup drug policy,theoretically,primary health care institutions cannot gain profit through drug sales.Also,government would compensate for the drug loss with financial subsidies.The key objective of zero markup drug policy is to decrease the irrational drug use,and control the cost escalation of healthcare.After the policy launched,village clinics that implemented the policy could only use drugs in the national and provincial essential drug list,which could only be sold at wholesale prices.Those clinics also could gain subsidies from government.It had major impact on the drugs village clinics can use and remove the perverse incentives for overuse of medicines.Till now,almost every village clinic in China has implemented zero markup drug policy,but the degree of the implementation varies.There are evidences that drug profits continued to be a major proportion of primary village clinics’revenue.The differences of implementation require more researches on the status of policy implementation and its impact on medical care.Additionally,the zero-markup drug policy may have impact on the quality of medical care since it changed the financial incentives of their medical behavior.But most of the existing literatures have only focused on the outcomes of prescribing behavior and cost.Considering this,this study also evaluated impact of the policy on quality of care.This study is an evidence-based research which try to unravel the relationship between the implementation of zero markup drug policy and medical care of village clinics.First,the author describes the implementation status of the policy and analyses its impact on medical care of village clinics,and then try to examine whether the incentives behind prescribing behavior has changed.The author also discussed the potential endogenous problems,and run robust test and heterogeneity analysis.The main results of the study are followed:(1)In general,the implementation of zero markup drug policy in village clinics is incomplete.There are village clinics still selling non-essential drugs to gain drug revenue.Also,the subsidies are not granted to several clinics.(2)The poor quality of medical services in village clinics needs to be improved.(3)Zero markup drug policy decreased the irrational drug use.The expense also declined.These findings suggest that the policy improved the efficiency.(4)The quality of care has not significantly changed by the zero-markup drug policy.(5)The subsidies removed the perverse economic incentives for medical services.(6)The policy has different impacts on village clinics’ medical care in different types of market.When there is only one clinic as itself in the village,the policy cannot improve the medical service.According to the main results above,the study put forward the suggestions as followed:Firstly,government should continue to advance the zero-markup drug policy and make adjustment and operation rules to the existing policy.Relevant departments should supervise the implementation and make sure the financial subsidies granted to village clinics.In addition,the impact of policy varied in different types of market systems.Considering the huge financial burden due to the subsidies,government should make adjustment to the subsidy pattern.