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Abstract Background: As China’s band purchasing policy affects firms’ revenues, this study aims to investigate how the revenues of firms entering the policy change in the context of the normalization of the policy, with the goal of providing suggestions for its improvement. Methods: We selected two time points, December 2018 and March 2019, to investigate the impact of the policy on firms’ revenues by means of a difference-in-differences model using data from 265 pharmaceutical companies in China. Results: We found that the policy has a negative effect on firms’ net income, which is significant at the 1% level when controlling for internal and external variables. We also demonstrated the reliability of the regression results through parallel trend, placebo, and randomness tests. Conclusions: Our research shows that although firms are able to gain a larger market share by entering centralized purchasing, the low prices result in lower revenues due to the market dynamics. These results also reflect the policy’s bias in favor of drug purchasers and users, as well as the nature of price competition that places affected pharmaceutical companies in a relatively passive position in the market.
Yang et al. (Tue,) studied this question.