The Impact of China's Zero Markup Drug Policy on Hospitalization Expenses for Inpatients in Tertiary Public Hospitals: Evidence Based on Quantile Difference-in-Difference Models

Objectives: The aim of this study was to determine the impact of the Zero Markup drug (ZMD) policy on hospitalization expenses for inpatients in tertiary Chinese hospitals. Methods: Using the administrative data from hospital electronic health records (EHRs) between 2015 and 2017, we implemented the quantile difference-in-differences (QDID) estimators to evaluate the impact of the ZMD policy on hospitalization expenses while controlling for patient-level and hospital-level characteristics. Results: According to the QDID models, the introduction of ZMD policy significantly induced lower drug costs for all inpatients especially at the 50th (-USD 507.84 (SE = USD 90.91), 75th (-USD 844.77 (SE = USD 149.70), and 90th (-USD 1400.00 (SE = USD 209.97)) percentiles of the overall distributions. However, the total hospitalization, diagnostic, treatment, material and services expenses for inpatients were significantly higher for the treated group than the control group. This tendency was more pronounced for inpatients in tertiary hospitals with lower expenses (in the 10th, 25th and 50th percentiles). Conclusion: The implementation of ZMD policy alone may not be enough to change the medical service providers' profit-driven behavior. The targeted supervision of hospital costs by the Chinese health administration department should be strengthened to avoid unreasonable hospital charges.