Recently, an academic paper titled "Has the Shortened Drug Distribution Chain Cut Drug Prices? Evidence from the Two-Invoice System in China," co-authored by Associate Professor Yin Nina (corresponding author) from the School of Innovation and Development, Central University of Finance and Economics (CUFE), Associate Professor Li Xiaoxi from Wuhan University (WHU), Postdoctoral Researcher Liu Fanyu from Peking University, and Professor Yan Jianye from China Agricultural University (CAU), was published online in theJournal of Health Economics, a top-tier international journal in the field of health economics and an AA-category journal at CUFE.

The paper can be accessed at:https://www.sciencedirect.com/science/article/pii/S0167629625001328.

The study aims to evaluate the policy effects and unintended consequences of the "two-invoice system" in pharmaceutical regulation. In response to rising drug prices worldwide, regulators across countries have prioritized price transparency and distribution efficiency as key reform objectives in the pharmaceutical sector. Against this backdrop, China launched the two-invoice system reform in 2016, seeking to reduce drug prices by compressing distribution layers and enhancing price transparency. Through theoretical modeling, the study finds that the two-invoice system may have dual effects on drug prices: on the one hand, it reduces intermediary markups caused by multiple layers of pricing (double marginalization); on the other hand, the exit of some efficient distributors may increase overall supply chain costs.

Using pharmaceutical procurement data from 2015 to 2019 and applying a staggered difference-in-differences approach for empirical analysis, the study finds that the implementation of the two-invoice system actually led to an average increase of 1.9 percent in drug prices. This effect is particularly pronounced for low-priced drugs and in more affluent regions, possibly because these areas originally had limited room for supply chain markups, making the efficiency-reducing effects of the policy more salient. In addition, the study finds a significant increase in manufacturers’ selling and marketing expenses, indicating that marketing costs previously borne by distributors were shifted to producers. These findings reveal potential unintended consequences of regulatory reforms and suggest that future policy design needs to strike a delicate balance between cost control and market dynamics.

TheJournal of Health Economics, published by Elsevier (North-Holland) since 1982, is a leading peer-reviewed journal widely recognized as a top outlet in the field of health economics. The journal is dedicated to publishing rigorous theoretical and empirical research that advances understanding of health, the functioning of healthcare markets, and the design of health policies.

Yin Nina is currently a tenured associate professor at the School of Innovation and Development, CUFE. Her research interests include health economics, empirical industrial organization, the digital economy and antitrust, and innovation and intellectual property. Her work has been published in international academic journals such as theJournal of Health Economics, Health Economics, American Journal of Health Economics, and theInternational Journal of Industrial Organization.Her research has also received the International Journal of Industrial Organization "Best Empirical Paper 2023" award.

Writers: YIN Nina

Reviewers:LIN Yiru

Editors: LI Ying

Approvers: HUO Xiaoran