Impact of National Drug Price Negotiation Policy on the Innovation Performance of Biopharmaceutical Industry in China

Yulu Zhu¹Jiazhen Zhu¹Xingyuan Gao¹Yi Sun¹Hongyu Yan¹Wenmin Du^1*Ying Wang^2*Xin Li^1*

• ¹Nanjing Medical University, Nanjing, China
• ²First Affiliated Hospital of Soochow University, Suzhou, China

Background The National Drug Price Negotiation (NDPN) policy is a key institutional reform in China that reshaped drug market access rules. While its effects on drug prices and accessibility are well documented, evidence on firm-level innovation performance remains limited. This study evaluates the impact of the 2019 NDPN on the innovation performance of Chinese biopharmaceutical firms. Methods We used quarterly panel data from 96 listed biopharmaceutical firms from 2018Q1 to 2023Q4. A difference-in-differences (DID) model combined with propensity score matching (PSM-DID) was employed to identify causal effects. Innovation performance was measured by R&D investment, patent application count, and overall growth score, with firm-and time-fixed effects as well as financial controls included. Robustness was assessed through parallel trend and placebo tests. Results DID estimates show that firms with NRDL-included drugs significantly increased R&D investment (coefficient = 0.733) and patent application count (coefficient = 0.362). Overall growth score showed This is a provisional file, not the final typeset article no short-term change. PSM-DID confirmed these findings, with R&D investment (coefficient = 0.693) and patent application count (coefficient = 0.272) both significantly improved. Conclusion The NDPN policy significantly enhanced firms' innovation performance by increasing R&D investment and patent applications, though its effect on overall growth remains limited in the short term. These findings provide firm-level evidence that NDPN strengthens innovation incentives in China's biopharmaceutical industry.