Study on the Impact of the Centralized Procurement Policy for Traditional Chinese Patent Medicines on the Innovation Performance of Listed Traditional Chinese Medicine Enterprises in China

Feng Li; Weishu Ma

doi:10.54691/fgxvzh79

Authors

Feng Li
Weishu Ma

DOI:

https://doi.org/10.54691/fgxvzh79

Keywords:

Traditional Chinese Patent Medicine, Procurement Policy, Innovation Performance.

Abstract

Despite continuing reforms in China’s healthcare system, bulk procurement policies for medicines have increasingly been used as a key regulatory tool in recent years. The objective of this kind of policy is to lower the cost of pharmaceuticals and establish operation standards in the domestic pharmaceutical market. With the gradual adoption of bulk procurement policies on traditional Chinese medicine formula products, discussion among academia and the general public has also been focused on the innovation strategies of enterprises affected by the bulk procurement policy. This study takes the A-share listed traditional Chinese medicine enterprises that trade on the Shanghai and Shenzhen stock exchanges during the period 2018 to 2024 into consideration. It builds the panel dataset of firms at an empirical level. Using the multiple difference-in-differences approach, the effects of traditional Chinese medicine formula bulk procurement policy on innovation outcomes of firms are evaluated. Mechanism test is done using three key indicators of enterprise operations. Empirical testing outcomes suggest that the implemented TCM bulk procurement regime may indicate meaningful enhancements in innovative performance for listed traditional Chinese medicine enterprises. Mechanism testing reveals that the policy drives the optimization of corporate resource allocation structure by increasing R&D investment, optimizing R&D personnel allocation, and reducing sales expense ratios, thereby fostering technological innovation. The research conclusions provide empirical evidence for evaluating the implementation effects of the centralized procurement policy for TCM preparations and promoting the innovative development of the TCM industry.

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