IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/23065.html
   My bibliography  Save this paper

When State Becomes the Only Buyer: Effects of national volume-based procurement of cardiac stents in China

Author

Listed:
  • SUN Jessica Ya
  • YIN Ting
  • LIU Zhiyong

Abstract

Medical device prices are a significant drivers of high healthcare spending in China; however, lowering prices remains an open question. We examine a unique solution for China as the central government acts as a single buyer for medical devices in the context of the national volume-based procurement (VBP) of cardiac stents. The tender held in November 2020 and reduced the average price of cardiac stents by 95%. Using detailed inpatient discharge record data, we found that the national VBP program increased patients’ total medical spending by 20%. The failure in reducing medical costs was due to physician-induced demand; the utilization of coronary stents and drug-eluting balloons increased by almost 10%. Distortionary effects were more prominent for patients with residential insurance and physicians with higher persuasion power.

Suggested Citation

  • SUN Jessica Ya & YIN Ting & LIU Zhiyong, 2023. "When State Becomes the Only Buyer: Effects of national volume-based procurement of cardiac stents in China," Discussion papers 23065, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:23065
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/23e065.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Currie, Janet & Lin, Wanchuan & Zhang, Wei, 2011. "Patient knowledge and antibiotic abuse: Evidence from an audit study in China," Journal of Health Economics, Elsevier, vol. 30(5), pages 933-949.
    2. Amitabh Chandra & Douglas O. Staiger, 2007. "Productivity Spillovers in Health Care: Evidence from the Treatment of Heart Attacks," Journal of Political Economy, University of Chicago Press, vol. 115(1), pages 103-140.
    3. Fu, Hongqiao & Li, Ling & Yip, Winnie, 2018. "Intended and unintended impacts of price changes for drugs and medical services: Evidence from China," Social Science & Medicine, Elsevier, vol. 211(C), pages 114-122.
    4. Alan I. Barreca & Melanie Guldi & Jason M. Lindo & Glen R. Waddell, 2011. "Saving Babies? Revisiting the effect of very low birth weight classification," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(4), pages 2117-2123.
    5. Wu, Bingxiao, 2019. "Physician agency in China: Evidence from a drug-percentage incentive scheme," Journal of Development Economics, Elsevier, vol. 140(C), pages 72-89.
    6. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-1349, April.
    7. Leemore S. Dafny, 2005. "How Do Hospitals Respond to Price Changes?," American Economic Review, American Economic Association, vol. 95(5), pages 1525-1547, December.
    8. Lu, Fangwen, 2014. "Insurance coverage and agency problems in doctor prescriptions: Evidence from a field experiment in China," Journal of Development Economics, Elsevier, vol. 106(C), pages 156-167.
    9. Matthew Grennan, 2014. "Bargaining Ability and Competitive Advantage: Empirical Evidence from Medical Devices," Management Science, INFORMS, vol. 60(12), pages 3011-3025, December.
    10. Mark Duggan & Fiona M. Scott Morton, 2006. "The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 1-30.
    11. Matthew Grennan, 2013. "Price Discrimination and Bargaining: Empirical Evidence from Medical Devices," American Economic Review, American Economic Association, vol. 103(1), pages 145-177, February.
    12. Hui Ding & Mark Duggan & Amanda Starc, 2021. "Getting the Price Right? The Impact of Competitive Bidding in the Medicare Program," NBER Working Papers 28457, National Bureau of Economic Research, Inc.
    13. Dominic Coey, 2015. "Physicians' financial incentives and treatment choices in heart attack management," Quantitative Economics, Econometric Society, vol. 6(3), pages 703-748, November.
    14. Currie, Janet & MacLeod, W. Bentley & Van Parys, Jessica, 2016. "Provider practice style and patient health outcomes: The case of heart attacks," Journal of Health Economics, Elsevier, vol. 47(C), pages 64-80.
    15. David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 526-548, Autumn.
    16. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    2. Lee, Ajin, 2020. "How do hospitals respond to managed care? Evidence from at-risk newborns," Journal of Public Economics, Elsevier, vol. 184(C).
    3. Mengna Luan & Wenjing Shi & Zhigang Tao & Hongjie Yuan, 2023. "When patients have better insurance coverage in China: Provider incentives, costs, and quality of care," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 1073-1106, October.
    4. Jeffrey Clemens & Joshua D. Gottlieb, 2017. "In the Shadow of a Giant: Medicare’s Influence on Private Physician Payments," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 1-39.
    5. Abe Dunn & Adam Hale Shapiro, 2018. "Physician Competition and the Provision of Care: Evidence from Heart Attacks," American Journal of Health Economics, MIT Press, vol. 4(2), pages 226-261, Spring.
    6. Manuel Adelino & Katharina Lewellen & W. Ben McCartney, 2022. "Hospital Financial Health and Clinical Choices: Evidence from the Financial Crisis," Management Science, INFORMS, vol. 68(3), pages 2098-2119, March.
    7. Sacarny, Adam, 2018. "Adoption and learning across hospitals: The case of a revenue-generating practice," Journal of Health Economics, Elsevier, vol. 60(C), pages 142-164.
    8. Ikegami, Kei & Onishi, Ken & Wakamori, Naoki, 2021. "Competition-driven physician-induced demand," Journal of Health Economics, Elsevier, vol. 79(C).
    9. Amaral-Garcia, S.;, 2022. "Medical Device Companies and Doctors: Do their interactions affect medical treatments?," Health, Econometrics and Data Group (HEDG) Working Papers 22/10, HEDG, c/o Department of Economics, University of York.
    10. Barili, Emilia & Bertoli, Paola & Grembi, Veronica, 2021. "Neighborhoods, networks, and delivery methods," Journal of Health Economics, Elsevier, vol. 80(C).
    11. Balafoutas, Loukas & Kerschbamer, Rudolf, 2020. "Credence goods in the literature: What the past fifteen years have taught us about fraud, incentives, and the role of institutions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 26(C).
    12. Bäuml, Matthias & Kümpel, Christian, 2020. "Hospital responses to the introduction of reimbursements by treatment intensity in a (presumably lump sum) DRG system," hche Research Papers 22, University of Hamburg, Hamburg Center for Health Economics (hche).
    13. Zhou, Mei & Zhao, Shaoyang & Fu, Mingwei, 2021. "Supply-induced demand for medical services under price regulation: Evidence from hospital expansion in China," China Economic Review, Elsevier, vol. 68(C).
    14. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
    15. Silvia Angerer & Daniela Glätzle‐Rützler & Christian Waibel, 2021. "Monitoring institutions in healthcare markets: Experimental evidence," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 951-971, May.
    16. Matthew Grennan, 2013. "Price Discrimination and Bargaining: Empirical Evidence from Medical Devices," American Economic Review, American Economic Association, vol. 103(1), pages 145-177, February.
    17. Müller, Tobias & Schmid, Christian & Gerfin, Michael, 2023. "Rents for Pills: Financial incentives and physician behavior," Journal of Health Economics, Elsevier, vol. 87(C).
    18. Craig, Stuart V. & Ericson, Keith Marzilli & Starc, Amanda, 2021. "How important is price variation between health insurers?," Journal of Health Economics, Elsevier, vol. 77(C).
    19. Attema, Arthur E. & Galizzi, Matteo M. & Groß, Mona & Hennig-Schmidt, Heike & Karay, Yassin & L’Haridon, Olivier & Wiesen, Daniel, 2023. "The formation of physician altruism," Journal of Health Economics, Elsevier, vol. 87(C).
    20. Matthew Grennan & Ashley Swanson, 2020. "Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1234-1268.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:23065. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.