Institutional Transition Of Drug Pricing And Influence Of Interest Groups On Drug Price Formation In China

In recent years, drug prices problem has received continuous attention in China. The relevant departments have tried several reforms and taken a variety of control modes, achieving to lower the drug prices, but it failed. On the contrary, the public has lost faith in medical reform, and the social contradiction deepens continuously. At present, the formation of China’s drug prices has returned to the market mechanism, which excluded the confusion bringing by artificial pricing but highlighted the failure and disorder of the drug market at the same time. In order to avoid the drug market losing control like in 1990s, the government needs to regulate the drug market as well as restrict and guide the behavior of relevant interest groups through scientific supporting system construction, thus we can correct the drug market efficiently without interfering the mechanism of it. Therefore, it is of theoretical and practical significance to analyze the formation of drug prices from the perspective of interest groups.On the basis of interest groups theory, this paper set up the interest groups model to analyze the established interest pattern by combing the history of drug prices management in recent years. Then the paper used the game theory to analyze the procedure of price formation in new drug and generic drug respectively, discussed how the characteristics and behavior of interest groups influenced the result of the game and the pricing mechanism in drug market, and then concluded the most suitable management style and reform direction of the government who as the drug regulator.On the basis of previous studies, this paper made some innovations. Firstly, under the latest background of drug pricing reform, this paper focused on the indirect regulation of drug prices rather than direct control. Secondly, the paper classified the stakeholders which influence the current formation of drug prices into three interest groups which have different behavior characteristics according to preference of drug prices, then contrasted the interactions among different interest groups before and after the reform. Thirdly, we discussed the price distortion for new drug market and generic drug market separately due to specific circumstances they faced, and joined the game of regulator group respectively.Through this paper we know that though the government has liberalized the drug pricing, it couldn’t relax the management of drug prices. However, the effectiveness of the management is not only related to the construction of the regulator, but also influenced by the power of other interest groups. So only after adjusting the game costs and power patterns among the interest groups can lead the game result to the direction lowering drug prices and forming new balance. Accordingly, the next step of drug pricing reform in China should be proceeding the construction of regulator group, and synchronously proceeding the construction of relevant systems which influence the power of interest groups. Thus we can handle the relationships among interest groups properly, and the drug prices can really be down.