Purchasing and selling mode in pharmaceutical industry in China : A case study on the Introduction of Direct Supply Mode in Hubei Zhongshan hospital

Abstract: Expensive medicine cost is always a thorny livelihood problem that most people complain about in China. From pharmaceutical factories to consumers, medicines prices increases several times during the circulation. Due to this situation, many hospitals launched different pattern of purchasing and selling medicines to decrease patients’ drug costs. Among them, the uniform bidding mode is the mode most commonly used by state-operated institutions in China. However, as a typical innovation pattern of purchasing and selling medicines, the drug direct supply mode launched by Hubei Zhongshan Hospital has achieved remarkable progress.   In this thesis, I intend to analyze these two modes and compare the performance of them to give some suggestions for future medical reform. The unified bidding mode achieved a win-win-win between pharmaceutical suppliers, medical institutions and patients. The direct supply mode compressed intermediate circulations to transfer multilayer wholesalers' profits to the patients to reduce their burden of medicine costs. However, the introduction of this purchasing mode may lead to market concentration which may influence prices in the longer run. For future medical reform, in the long run, the key is the separation of medical services and pharmaceutical sales. However, from a short-term perspective, direct supply mode can be adopted to solve the core issue of excessive price-adding in medicine circulations.