Can Price Controls Reduce Pharmaceutical Expenses? A Case Study of Antibacterial Expenditures in 12 Chinese Hospitals from 1996 to 2005

The objective of this article is to investigate whether the Chinese government's pricing policies have reduced pharmaceutical expenses. The purchasing records for systemic antibacterial drugs of 12 hospitals in Beijing from 1996 to 2005 were analyzed by separating the expenditure growth into three components: the price change, the volume change, and the structure change. Our results reveal that the structure change is the dominant determinant of drug expenditure growth. Despite lowered prices, the antibacterial drug expenditure was raised because more expensive drugs in the same therapeutic category were prescribed. It is insufficient to rely only on pricing policies to reduce drug expenses, given that physicians could circumvent the policy by prescribing more expensive drugs. In addition, physician behaviors need to be regulated to eliminate unnecessary overprescribing.