Policy Evaluation Of Drug Pricing Regulations Based On ARIMA Model

The issue of drug price in China has aroused wide public concern in recent years.In order to control and reduce the high drug prices, the government of China hasadopted many polices, such as government pricing, mandatory price cuts, centralizedbid procurement and so on. Some people think that these direct administrativemeasures take effect to some extent, while others don’t think so; some other peopleeven question these governmental administrative methods may bring about negativeeffect. Aiming at these disputes, using the data of price indexes associated with drugs,this study sets up an ARIMA(Autoregressive Integrated Moving Average) model bymeans of theory of econometrics. Through this method, the study evaluates theeffectiveness of governmental control drug price polices since the year of2004.Based on the empirical study, the quantitative analysis is the mainstream. Thispaper also combines with the document study and characterization analysis. Firstly,the literature on the study of government control drug price policies’ effect at homeand abroad are summarized and classified. It can be found that many domestic andforeign scholars believe that the policies didn’t work as our expectation. Some ofthem even point out that these measures created undesirable impact on pharmaceuticalindustry. Secondly, in order to checkout whether polices take effect on the drug prices,the study establishes an ARIMA model, parameter estimation and hypothesis testingare used to ensure the feasibility and reliability of this method.From the discussion about the experimental results, the following conclusion canbe obtained. First, the drug price policies actually affect the prices modestly. Second,there is no obvious difference between urban and rural price level. Third, some of thegovernment regulations give rise to the price index slightly and have some adverseeffects. Finally, the study discuss in-depth some reasons of why the polices doesn’twork as government expect.