Evaluation of the effectiveness of comprehensive drug price reform: a case study from Shihezi city in Western China

The rapid increase in drug price puts considerable strain on the affordability and sustainability of healthcare spending [1, 2]. According to a report on global drug use survey, global drug expenditures that reached $1.2 trillion in 2018 will exceed $1.5 trillion by 2023, and the average annual growth rate will be 3 to 6%. Meanwhile, most (73%) of the global drug expenditure is in US, EU5 (i.e. Germany, France, Italy, U.K. and Spain), Japan and China [3]. In the past decades, many countries have explored the implementation paths of drug price reforms, such as drug–price regulation, payment reform of medical insurance, combination of drug–price regulation and drug–use reduction, to curb the rising drug expenditures [2, 4‐8]. These reforms have reduced drug prices in the short-term but are unsustainable and have even produced unexpected results, such as a rebound in drug costs [4, 7‐9].

In China, the long-term surge of drug expense (DE) is because medical service prices are lower than the labour costs of medical staff [10]. However, public hospitals can make a 15% profit in prescribing drugs to make up for the deficit in the low prices of medical services [11]. The relationship between hospital medical revenue and DE has led to an artificial rise in drug prices and a surge in hospitalisation expenses (HE) [12, 13]. Another reason for the increase in DE is associated with the basic medical insurance (BMI) payment regime. In China, the BMI fund compensates inpatients for medical expenses more than outpatients [14]. Moreover, the compensations for medical expenses amongst inpatients vary by hospitals. That is, the higher the hospital tier, the lower the compensations of medical expenses. The purpose is to reduce the financial burden of inpatients and guide the patients to rationally choose a hospital according to their health status [15]. However, it has not limited the patients’ behaviour for seeking healthcare service [16], so a large number of patients seeking high-quality medical service bypass primary hospitals to visit secondary and tertiary hospitals, thereby increasing unnecessary medical expenses [17]. According to statistics, the DE in public hospitals exceeded 30% of the per capita HE between the years 2007 and 2017, up to even 40% (Additional file 1 Fig. S1), far higher than 17% in the member countries of the Organization for Economic Co-operation and Development [7]. In the face of this situation, the Chinese government promulgated three guiding opinions on the pilot of the comprehensive reform of urban public hospitals, the reform of medical service price and the reform of BMI payment methods from 2015 to 2017 [15, 18, 19]. The comprehensive drug price reform (CDPR) has begun to take shape.

Shihezi, a city of Xinjiang Production and Construction Corps (XPCC), is located in western China where the economic development lags behind the eastern and central regions [20]. Meanwhile, it is one of the core region of China’s “silk road economic belt” and the maintenance of national stability. At present, the city’s population accounts for 21% of the XPCC’s total population, and its health expenditure exceeds 3% of the national average health expenditure [21, 22]. According to statistics, the population aged 65 years and older in Shihezi accounts for 17% of the total population in 2015, exceeding the national average of 5.5%, and the prevalence of chronic diseases has reached 599.3‰ [23, 24]. These findings can further aggravate the utilisation rate of hospitalisation services and stimulate the growth of health expenses [25]. In 2017, all public hospitals in China have implemented the CDPR officially [26]. In September 2017, Shihezi launched the CDPR, which involves three aspects, namely, eliminating the 15% drug profit, increasing the medical service price to make up the loss of drug price and scientifically adjusting BMI payment standards to ensure that the first two reforms do not increase the financial burden of patients.

Literature review revealed that DE shows a downward trend in regions where the above reforms have started early. By the end of 2016, more than 90% of public hospitals from 200 pilot cities nationwide have cancelled drug markup, and the proportion of DE in HE have shown a negative growth (from 36.8% in 2015 to 34.6% in 2016) for the first time [27]. However, the accumulated evidences in the literature showed that HE paid by the BMI funds also has a downward trend [28‐30]. A study found that the drug price level in western low-income regions such as Gansu and Yunnan was higher than that in eastern high-income regions such as Beijing and Jiangsu, suggesting that the CDPR may ignore the imbalance of economic development in various regions [31]. A study from economically developed region found that some public hospitals made more profits by over-delivery of medical services and over-admission of patients [32]. Above evidences indicated differences in the actual implementation of reform policy by local governments at the local level, the lack of effective linkage between the policies of adjusting medical service price and adjusting BMI payment, and the excessive utilisation of medical services. So far, except for a study on a single-institution [33], no large population size has been used to study the effectiveness of the CDPR in the XPCC. Based on the above situation, it is urgent to clarify the effects of the CDPR in this city, which will have an important impact on the population health and economic development of XPCC in the future.

In view of the positive and negative effects of early drug price reforms in the pilot regions and the heterogeneity in the effects of CDPR from different regions, the objective of the current study is to evaluate the effectiveness of CDPR through the changing trends in medical expenses, medical service utilisation and government financial reimbursement for inpatients before and after the CDPR in Shihezi. These findings will provide the basis for promoting the health equity of the residents in regions with weak economic development and provide a reference for countries and regions with similar of economical development and health expenditure to formulate and improve drug reform policies.

Since the CDPR, our study shows that the per capita HE presents an expected downward trend, in which the DE share gradually decreased and the DTE share increased accordingly. Moreover, the overall utilisation of medical service was a decrease of 9340 person-times compared with that before the reform. The government’s financial reimbursement for inpatients has changed.

Our finding corroborated previous research showing the CDPR implementation effectively controls the rapid growth of HE and adjusts its structure [29, 37, 38]. These previous studies focused more on the impact of CDPR on medical expenses than on BMI reimbursement or medical service utilisation, or both. Through in-depth analysis of the changing trend of BMI reimbursement and medical service utilisation in different hospitals, we found that the decrease of medical service utilisation was mainly focused on that in large hospitals such as secondary and tertiary hospitals, and the main change of government financial reimbursement was a decline in the BMI reimbursement level for inpatients in tertiary hospitals. Among the few studies that comprehensively analyzed the impacts of CDPR on HE, BMI reimbursement and medical service utilization, a study [32] from high-income region found that the CDPR increased the BMI reimbursement level, thus stimulating inpatients to over-utilize medical service in large hospitals. Another study [28] from a region with similar economic development to this study found that the CDPR had raised the BMI reimbursement level in tertiary hospitals. The above studies used descriptive methods to analyze the changing trend of BMI reimbursement and medical service utilisation, which could not exclude the possibility of an upward or downward trend before the intervention. Therefore, our study complements the evidence on the impact of CDPR on the BMI reimbursement and medical service utilisation.

A reduction of HE could stimulate more patients to release the needs for hospitalization services. This study found that after the reform, the utilisation of medical services not only didn’t increase, but reduced utilisation of medical service in secondary and tertiary hospitals didn’t trigger an influx of patients into primary hospitals. Under the influence of many factors such as economic development and medical resources, the medical service utilisation in western China has been lower than that in other regions [39]. This finding implies a further deterioration in the low utilisation of medical service in this region. The result should be related to the BMI payment. In addition to adjusting reimbursement, the reform of BMI payment launched the global-budget payment system and payment by the type of disease as part of the CDPR. These two payment methods, by setting each hospital’s annual budget and the payment criteria for each common disease, and adopting the principle of surplus retention and non-compensation of overspending, stimulated each hospital to actively control the increase in the overall and personal medical expenses and reduce inappropriate admission [40‐42]. However, when deciding on admission, doctors may prefer to choose patients with no comorbidities, complications or unserious illness to avoid exceeding the annual budget apportioned to the department and the payment limit for the diseases [43]. Therefore, the reduction of inpatients should include both those who are improperly admitted and those with sevious illness who need to be admitted but are refused. This finding shows that the implementation of the CDPR reduces the medical service utilisation of patients with severe diseases and lessens the chances of their access to timely and effective treatment.

The decrease of BMI reimbursement level in tertiary hospitals after the CDPR demonstrates that Shihezi government has reduced the compensation for patients with critical and severe diseases. The medical service function in tertiary hospitals in China is to rescue, diagnose and treat patients with critical and severe illness [44]. Thus, the condition of inpatients who meet the admission standards of tertiary hospitals should be more serious than that in other hospitals. BMI reimbursement is designed to provide financial risk protection for patients against poverty caused by disease [45]. This finding demonstrates that after the CDPR, the out-of-pocket medical expenses of inpatients in tertiary hospitals are increasing. From the patients’ perspective, this not only increases the financial burden on inpatients with relatively severe and complex diseases, but may also be a key factor that affects access to medical services for patients with poverty who meet the criteria for hospital stay in tertiary hospitals.

There are several limitations observed in this study. A major limitation is that the accessibility of data limits comparative analysis with other representative cities to evaluate the effectiveness of the CDPR more comprehensively. A long-term multiregional evaluation is needed to evaluate the overall effect of the reform objectively and comprehensively. A report on the similarities and differences between the effects and objectives of CDPR in a city from Western China is provided as a basis for future studies. The difference in the severity of inpatients’ illness before and after the reform cannot be determined due to the limited data. Thus, the influence of this confounding factor on HE cannot be ruled out. At present, the payment model of disease-related groups for inpatients’ care is still in the pilot stage [46]. For further studies, the combination index of case in the payment method can be used to reflect the severity of the disease, the complexity of diagnosis and treatment methods, the amount of resource consumption, and evaluate the effectiveness of the reform more scientifically and objectively. Finally, the models in this study assume a linear trend of outcome variables before and after the intervention. In fact, the possibility of non-linear trends also exists. Although some models, such as Box-Jenkins models, may be used to analyze non-linear trends, they are less useful in examining changes in trend occurring at defined time points [47]. In this study, 12 data points before and after the CDPR and more than 100 observations per data point were collected, which can provide the robust estimates of change in level and trend for outcomes [48].

Although the study has limitations, our findings provide important implications for the health development of CDPR in regions with weak economic development. The reduction of medical service utilisation and the diminution of financial compensation for patients with critical and severe implicates that the reform of the medical insurance payment system in the CDPR only focuses on the control of medical expenses and the adjustment of the structure of DE and DTE, but ignores the correct guidance of medical service utilisation and the financial risk protection of patient. It illustrates that synchronising the suite of policies is affected by the fragmented governance of medical care, medicine and medical insurance. Therefore, when formulating the specific measures of the CDPR, local governments need to adapt to the local conditions and give full play to the incentive and compensation mechanisms of medical insurance, rather than mechanical control medical expenses and restructuring them.

Overall, the CDPR has decreased the per capita HE and per capita DE amongst the inpatients of Shihezi significantly and has a positive role in increasing DTE. Results demonstrate that the CDPR controls the increase in medical expenses and reasonably adjusts its structure. However, the CDPR reduces the medical service utilisation of inpatients in secondary and tertiary hospitals and sharply declines the government financial reimbursement for inpatients in tertiary hospitals. The former may affect the timely and effective treatment for patients with serious diseases, whereas the latter increases the financial burden on inpatients from tertiary hospitals and may hinder access to medical services for patients who meet the criteria for admission to tertiary hospitals. These findings will affect the health equity of population in this aging city, eventually affecting the process of reform.