Time: May.9 (Tue.), 14:00 – 15:30 (Beijing Time)

Title: Excessive Pharmaceutical Marketing Expenditure: Social Costs and Policy Remedies from China

Venue: Zhonghui Building 106

About the speaker:

刘晨源，清华大学经管学院经济系助理教授，主要研究方向为健康经济学和产业组织，相关研究发表于American Economic Journal: Economic Policy、Journal of Health Economics等期刊。

Abstract:

Many developing countries face high pharmaceutical prices despite the existence of multiple producers of generic versions of drugs. One reason is that drug firms spend excessively on sales and marketing efforts. In this paper, we quantify the social costs of hidden pharmaceutical marketing expenditures by leveraging a policy experiment in China. Under the policy, certain generic drugs were procured via centralized auctions in pilot cities. We estimate that the centralized auction effectively reduced the prices of procured drugs, leading the expenditures on these drugs to fall by 32% on average. The policy also changes the cost structure of the firms. We find that firms winning the auction in experienced a significant decline in sales and marketing expenditure, suggesting that the pre-policy high drug price was driven by excessive marketing expenditure.