Effects of different mark-up drug policies on drug-related expenditures in tertiary public hospitals: an interrupted time series study in Shanghai, China, 2015-2018

An assessment of the implications of distribution remuneration and taxation policies on the final prices of prescription medicines: evidence from 35 countries

This paper analyses the structure of and variability in taxation and prescription drug distribution policies and quantifies the impact of such policies on the cost of prescription drugs to health systems in 35 countries. Taxes on prescription drugs remain highly prevalent (83% of the sample) although 63% of the sample countries implement a lower than standard VAT rate. Three remuneration types of the wholesale and retail distribution chain have been identified. Wholesale and retail distributors are remunerated on a regressive mark-up basis, which is price-dependent, although fixed fees and fixed percentages, which are non-price dependent, are also highly prevalent. Price component analysis for three groups of products classed as high-, medium- and low-priced suggests that mark-ups plus taxes varied significantly across countries and products, and ranged from 5% to 187% of ex-factory prices. Average margins also vary significantly by countries and products ranging 5-65% of retail prices. The cost of distribution and taxation contributes significantly to prescription drug costs for health systems. Although distribution chain remuneration raises efficiency and overall affordability questions, these need to be considered together with the regulatory framework shaping market structure of the distribution chain, as well as any prevailing horizontal and vertical integration policies. The overall cost of prescription drugs could be reduced immediately by eliminating taxation; this could go some way to alleviate fiscal pressures on health budgets, whilst avoiding resource re-allocation from health to other sectors.

A systematic review of policies regulating or removing mark-ups in the pharmaceutical supply and distribution chain

The regulation of mark-ups throughout the pharmaceutical supply and distribution chain may be a valuable approach to control prices of medicines and to achieve broader access to medicines. As part of a wider review, we aimed to systematically determine whether policies regulating mark-ups are effective in managing the prices of pharmaceutical products. We searched for studies published between January 1, 2004 and October 10, 2019, comparing policies on regulating mark-ups against other interventions or a counterfactual. Eligible study designs included randomized trials, and non-randomized or quasi-experimental studies such as interrupted time-series (ITS), repeated measures (RM), and controlled before-after studies. Studies were eligible if they included at least one of the following outcomes: price (or expenditure as a proxy for price and volume), volume, availability or affordability of pharmaceutical products. The quality of the evidence was assessed using the GRADE methodology. A total of 32,011 records were retrieved, seven of which were eligible for inclusion for this review. The limited body of evidence cautiously suggests that policies regulating mark-ups may be effective in reducing medicine prices and pharmaceutical expenditures. However, the design of mark-up regulations is a critical factor for their potential success. Additional research is required to confirm the effects of these policies on the availability, affordability or usage patterns of medicines and in low- and middle-income countries.

The impact of China's zero markup drug policy on drug costs for managing Parkinson's disease and its complications: an interrupted time series analysis

Background

In April 2009, the Chinese government launched Zero Markup Drug Policy (ZMDP) to adjust medical institutions' revenue and expenditure structures.

Objective

This study evaluated the impact of implementing ZMDP (as an intervention) on the drug costs for managing Parkinson's disease (PD) and its complications from the healthcare providers' perspective.

Methods

The drug costs for managing PD and its complications per outpatient visit or inpatient stay were estimated using electronic health data from a tertiary hospital in China from January 2016 to August 2018. An interrupted time series analysis was conducted to evaluate the immediate change following the intervention (step change, β₁) and the change in slope, comparing post-intervention with the pre-intervention period (trend change, β₂). Subgroup analyses were conducted in outpatients within the strata of age, patients with or without health insurance, and whether drugs were listed in the national Essential Medicine List (EML).

Results

Overall, 18,158 outpatient visits and 366 inpatient stays were included. Outpatient (β₁ = -201.7, 95%CI: -285.4, -117.9) and inpatient (β₁ = -372.1, 95% CI: -643.6, -100.6) drug costs for managing PD significantly decreased when implementing ZMDP. However, for outpatients without health insurance, the trend change in drug costs for managing PD (β₂ = 16.8, 95% CI: 8.0, 25.6) or PD complications (β₂ = 12.6, 95% CI: 5.5, 19.7) significantly increased. Trend changes in outpatient drug costs for managing PD differed when stratifying drugs listed in EML (β₂ = -1.4, 95% CI: -2.6, -0.2) or not (β₂ = 6.3, 95%CI: 2.0, 10.7). Trend changes of outpatient drug costs for managing PD complications significantly increased in drugs listed in EML (β₂ = 14.7, 95% CI 9.2, 20.3), patients without health insurance (β₂ = 12.6, 95% CI 5.5, 19.7), and age under 65 (β₂ = 24.3, 95% CI 17.3, 31.4).

Conclusions

Drug costs for managing PD and its complications significantly decreased when implementing ZMDP. However, the trend in drug costs increased significantly in several subgroups, which may offset the decrease at the implementation.

How Did Zero-Markup Medicines Policy Change Prescriptions in the Eyes of Patients?-A Retrospective Quasi-Experimental Analysis

BACKGROUND

China implemented the zero-markup medicines policy to reverse the overuse of medicine in public health institutions, by changing the distorted financing mechanism, which heavily relies on revenue generated from medicines. The zero-markup medicines policy was progressively implemented in city public hospitals from 2015 to 2017.

OBJECTIVE

This study is expected to generate convincing evidence with subjective measurements and contribute to a more comprehensive evaluation of the policy from both objective and subjective perspectives.

METHODS

This study was based on a large patient-level dataset with a quasi-experimental design. We employed the difference-in-difference (DID) method, combined with propensity score matching methods, to estimate the causal effect of the policy in reducing overprescriptions from the patient perspective.

RESULTS

The study estimated a statistically significant increased probability that the responded outpatients denied overprescription in their visiting hospitals. The mean interacted policy effect, in percentage points, of all observations were positive (logit DID model: 0.15, z = 10.27, SE = 0.01; PSM logit DID model: 0.15, z = 10.26, SE = 0.01; PSM logit DID hospital fixed-effect model: 0.12, z = 3.00, SE = 0.04).

DISCUSSION

The policy might reduce overprescription in public hospitals from the patient's perspective. The patient's attitude is one aspect of a comprehensive policy evaluation. The final concrete conclusion of the policy evaluation can only be made through a systematic review of the studies with rigorous design and with both objective and subjective measurements.

Did the universal zero-markup drug policy lower healthcare expenditures? Evidence from Changde, China

Background

The zero-markup drug policy (also known as the universal zero-markup drug policy (UZMDP)) was implemented in stages beginning with primary healthcare facilities in 2009 and eventually encompassing city public hospitals in 2016. This policy has been a central pillar of Chinese health reforms. While the literature has examined the impacts of this policy on healthcare utilization and expenditures, a more comprehensive and detailed assessment is warranted. The purpose of this paper is to explore the impacts of the UZMDP on inpatient and outpatient visits as well as on both aggregate healthcare expenditures and its various components (including drug, diagnosis, laboratory, and medical consumables expenditures).

Methods

A pre-post design was applied to a dataset extracted from the Changde Municipal Human Resource and Social Security Bureau comprising discharge data on 27,246 inpatients and encounter data on 48,282 outpatients in Changde city, Hunan province, China. The pre-UZMDP period for the city public hospitals was defined as the period from October 2015 to September 2016, while the post-UZMDP period was defined as the period from October 2016 to September 2017. Difference-in-Difference negative binomial and Tobit regression models were employed to evaluate the impacts of the UZMDP on healthcare utilization and expenditures, respectively.

Results

Four key findings flow from our assessment of the impacts of the UZMDP: first, outpatient and inpatient visits increased by 8.89 % and 9.39 %, respectively; second, average annual inpatient and outpatient drug expenditures fell by 4,349.00 CNY and 1,262.00 CNY, respectively; third, average annual expenditures on other categories of healthcare expenditures increased by 2,500.83 CNY, 417.10 CNY, 122.98 CNY, and 143.50 CNY for aggregate inpatient, inpatient diagnosis, inpatient laboratory, and outpatient medical consumables expenditures, respectively; and fourth, men and older individuals tended to have more inpatient and outpatient visits than their counterparts.

Conclusions

Although the UZMDP was effective in reducing both inpatient and outpatient drug expenditures, it led to a sharp rise in other expenditure categories. Policy decision makers are advised to undertake efforts to contain the growth in total healthcare expenditures, in general, as well as to evaluate the offsetting effects of the policy on non-drug components of care.

Impact of zero-mark-up medicines policy on hospital revenue structure: a panel data analysis of 136 public tertiary hospitals in China, 2012-2020

OBJECTIVE

To quantify the overall and dynamic effects of the implementation of the zero-mark-up medicines policy on the proportionate revenue generated from medicines, medical services and government subsidies at Chinese tertiary public hospitals.

METHODS

The revenue data of 136 tertiary public hospitals from 2012 to 2020 and the implementation-time framework of zero-mark-up medicines policy of these hospitals were obtained from the institutional survey of the third-party evaluation of the China Healthcare Improvement Initiative. The study adopted the time-varying difference-in-differences method and combined it with the event study approach to estimate the effects of the zero-mark-up medicines policy.

RESULTS

Following the implementation of the policy, the proportionate medicines revenue decreased by 3.23% (p<0.001); the proportionate medical services revenue increased by 3.48% (p=0.001); and the difference in the proportionate government subsidies revenue was not significant. In the year of implementation, the proportion of revenue generated from medicines decreased by 7.76% (p=0.0148); and that from medical services increased by 8.62% (p=0.0167). The effect of the policy gradually strengthened thereafter. In 2020, the sixth year after some hospitals started the implementation of the policy, the share of revenue generated from medicines decreased the most by 18.43% (p=0.0151), and that generated from medical services increased the most by 15.29% (p=0.0219). The share of revenue generated from government subsidies increased by 2%-5% in the second, third, fifth and sixth years following implementation (p<0.05).

CONCLUSIONS

Although the policy goal of adjusting hospital revenue structure has been achieved, the findings were insufficient to conclude whether the policy goal of establishing a scientific compensation mechanism was met by increasing the price of medical services and government input. Additionally, whether there was an unexpected policy effect requires further analysis.

Impact of Beijing healthcare reform on the curative care expenditure of outpatients with noncommunicable diseases based on SHA2011 and interrupted time series analysis

BACKGROUND

To analyse the changes in curative care expenditure (CCE) associated with noncommunicable diseases (NCDs) before and after the Beijing healthcare reform, thus providing a reference for the healthcare system.

METHODS

A total of 60 medical institutions were selected using multistage stratified cluster random sampling in Beijing, China. The records of approximately 100 million outpatients with NCDs in 2016-2018 were extracted. System of Health Accounts 2011 (SHA2011) was used to estimate the CCE. The segmented regression model was established to observe both the instant change and the slope change of intervention in interrupted time series analysis (ITSA). The study was conducted from December 2019 to May 2020 in Beijing, China.

RESULTS

From SHA2011, we found that the CCE for outpatients with NCDs in Beijing were 58.59, 61.46 and 71.96 billion RMB in 2016, 2017 and 2018, respectively. The CCE continued to rise at all hospital levels, namely, tertiary, secondary, and community-level hospitals. However, the proportion of CCE in tertiary hospitals decreased. From ITSA, we can also conclude that the CCE showed a significant increasing trend change at the three hospital levels after the intervention. The drug proportion showed a significant decreasing trend change in secondary and tertiary hospitals.

CONCLUSIONS

Beijing healthcare reform does have an impact on the CCE of NCDs.

Effects of Chinese medical pricing reform on the structure of hospital revenue and healthcare expenditure in county hospital: an interrupted time series analysis

Background

China has initiated a medical pricing reform to combat the overuse of drugs and relieve the financial burden of patients. This paper aims to analyze the effect of medical pricing reform on revenue structure and healthcare expenditure of county public hospitals in Guangdong province.

Methods

Based on the monthly data from January 2013 to August 2019, we use interrupted time series design to evaluate the effects of medical pricing reform on healthcare expenditure in both outpatients and inpatients. A counterfactual is also established to examine the net effect of the policy.

Results

The proportion of drug revenue decreased from 35 % to 2015 to 29.7 % in 2019, and the revenue from medical services and inspection increased 3.2 and 3 % respectively. Meanwhile, the increasing trend of total expenditure and its main components is slowed down, especially the drug expense and medical consumable expense for inpatients after the Zero Mark-up Drug policy (coefficient = -18.76, p < 0.01; coefficient = -13.41, p < 0.01, respectively). However, the growth of inspection expense for outpatients continues to increase, while the healthcare expenditure for inpatients experiences an instant increase after the Zero Mark-up Medical Consumables policy. In terms of the net effect, most of healthcare expenditure in both outpatient and inpatient experienced a negative net growth from 2015 to 2019.

Conclusions

The medical pricing reform is a valuable attempt in controlling the unreasonable increase of medical expenses. In the meantime, the unexpected increase in inspection expenditure and insufficient compensation from medical service adjustment should draw the attention of the policymakers.

Customer relationship management analysis of outpatients in a Chinese infectious disease hospital using drug-proportion recency-frequency-monetary model

BACKGROUND

Identifying the patient types with different economic values can be useful for hospital development.

OBJECTIVE

This work uses the theory of customer relationship management (CRM) to analyze the outpatients in the hospital for infectious diseases in Shanghai, China.

METHODS

A total of 2,271,020 data elements of outpatients in the research unit between August 2009 and December 2019 were extracted, analyzed and cleaned to obtain 171,107 valid data elements (1 element per person). The main diseases were viral hepatitis B (VHB) and acquired immunodeficiency syndrome (AIDS), and the average percentage of drug expenditure was 80.39 %. We innovatively expanded the classic RFM (R: recency, F: frequency, M: monetary) model in CRM to the dRFM (d: percentage of drug expenditure) model. We selected the best clustering algorithm from the K-means, Kohonen and two-step clustering methods to find the optimal model to distinguish the types of patients with different economic values and the best decision-making algorithm from the C5.0, CART classification regression tree, CHAID and QUEST algorithms to verify the model.

RESULTS

After performing two rounds of K-means clustering analysis on three models: RFM, RFM + dRFM and dRFM, and 97,855 data elements were retained. The RFM + dRFM model was the optimal model, clustering the patients into 3 types: potential patients (24.2 %) to be retained, with a high drug expenditure and the last visit in more than 19.06 months, high-value patients (24.5 %) to be attracted, with the last visit in about 6.66 months; basal patients (51.3 %) to be kept, with the last visit in about 3.7 months. The model was then verified using the C5.0 decision tree algorithm with an accuracy rate of 99.97 %.

CONCLUSION

This objective CRM analysis of the patients in the hospital for infectious diseases using the dRFM model accurately identified different types of patients, providing an objective and effective basis for hospital management.

Impact of DRGs-based inpatient service management on the performance of regional inpatient services in Shanghai, China: an interrupted time series study, 2013-2019

Background

The asymmetry of information brings difficulty for government to manage public hospitals. Therefore, Jiading District of Shanghai has been establishing DRGs-based inpatient service management system (ISMS) to effectively compare the output of different hospitals through DRGs, reward desired hospital performance and enhance inpatient service capacity. However, the impact of the implementation of DRGs-based inpatient service management (ISM) policy in Jiading district is still unknow. We therefore conducted this study to evaluate the impact of DRGs-based ISM policy on the performance of inpatient service since its implementation in Jiading District, Shanghai, China in 2017.

Methods

Using an interrupted time series design, we analyzed quarterly data of seven DRGs-based performance measures from the ISMS which covered all five public hospitals in Jiading District from 2013 to 2019. We utilized the segmented linear regression model to assess the change of level and trend of performance indicators before and after ISM policy. Dickey–Fuller test was used to examine the stationary of the data. Durbin-Watson test was performed to check the series autocorrelation of indicators.

Results

Significant changes in the following indicators were observed since the implementation of ISM policy. The case-mix index (CMI) level decreased by 0.103 (P < 0.05), the trend increased by 0.008 (P < 0.05). The total weight level decreased by 3719.05 (P < 0.05), and the trend increased by 250.13 (P < 0.05). The time efficiency index (TEI) level increased by 0.12 (P < 0.05), and the trend decreased by 0.01 (P < 0.05). The cost efficiency index (CEI) level increased by 0.31 (P < 0.05), and the trend decreased by 0.02 (P < 0.05). No significant difference was found in the change of DRGs number, inpatient mortality of low-risk group cases (IMLRG) and inpatient mortality of medium-to-low risk group cases (IMMLRG).

Conclusions

Findings highlight the role of ISM policy in improving the capacity and efficiency of regional inpatient service. Three prerequisites, including a good information system, high-quality EMR data, and a management team, are needed for other countries to implement their own ISM policy to help government manage public hospitals and improve the performance of regional inpatient service.