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The Chinese government has launched six rounds of national drug price negotiation since 2016 to lower the price and expand access to innovative drugs, many of which are anticancer drugs. This study aims to examine the effect of the second round of negotiation at the provincial level on the expenditure, volume, and availability of anti-cancer drugs. Procurement data at the provincial level from January 2017 to September 2018 were extracted from the China Drug Supply Information Platform (CDSIP).

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9025142/

I am wondering if market size is inversely correlated with negotiated drug prices, or it's something more complex where more variables come at play.

https://www.bloomberg.com/graphics/2019-china-healthcare/

Less than five years ago, Chinese healthcare was a closed-off, low-quality system where the richest left the country for medicines and treatments, and the poorest took a bad diagnosis as a death sentence. Now, the world’s second largest economy is striving to become a place where patients can get the best, newest drugs and services faster and cheaper than anywhere else. Pressured by its growing middle class, the Chinese government has set itself an ambitious target: first-world health outcomes at a fraction of the cost that other countries, especially the U.S., pays.

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I am wondering if market size is inversely correlated with negotiated drug prices, or it's something more complex where more variables come at play.

I'm not a health economist but will say without a doubt, there are other variables at play.

I didn't really find a relevant comparative study that directly looks at the question posed. However, I did find a study with somewhat relevant data focusing on generic drug prices in the US and Europe. It includes a table of data comparing market size, and a graph showing how the countries compare in terms of the ex-manufacturer prices they get. Switzerland pays the most while Netherlands is on the low end, but Switzerland has double the population and a similar total spend on generics. Meanwhile Germany is in the middle of the pack in terms of their ex-manufacturer generic drug prices, but is easily the largest European market in terms of both total population and total amount spent on generic drugs.

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I will not speculate about what other variables are at play, but drug price negotiation is clearly a complex political process. This particular study focuses on adoption of generics in the market rather then the politics of price negotiation, but here is a different study which focuses on the range of different approaches taken to these negotiations by Asia-Pacific countries. It identifies no less then seven distinct strategies which are pursued in different combinations. It is possible that different strategies may lead to different results, and this may be partly mediated by market size among other factors.

Without a more directly relevant study to look at, I can't say confidently that market size isn't one of the most important variables. But it is clearly not the only variable that matters.

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  • Note that Switzerland is both rich and also an outlier on how much it spends on healthcare per capita, next to the US. Those might be bigger factors than just its size. Sep 10, 2023 at 1:15
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    I would also note that in most countries drugs are heavily regulated and can only be sold with government permition. So from the drug companies perspective it is either come to an agreement with the government or just don't be allowed to sell in that country.
    – quarague
    Sep 10, 2023 at 5:16
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Any country's government has a huge opportunity to lower drugs prices by easing some of regulations and allowing new players in. There are multiple steps of that process, which starts from removing artificial barriers preventing new suppliers from entering that market and going all the way towards allowing parallel import and encouraging generics.

Unfortunately, many governments seem to treat drugs market as a cash cow: The government gets a lot of taxes and jobs created by the act of curating that market, the corporations in turn get an opportunity to raise a lot of money due to inflated drugs prices (which both of the parties may then use to subsidy other, important areas of their business), drugs advertising revenues flow into information economy and allow media to function, but the consumer gets to foot the bill for all that.

The obvious problem with this approach is that it often squeezes money from people for whom it is a matter of life and death to afford drugs coming at inflated price tag. The notorious offender here is the US, which also does it to its hospital care market and not just drugs.

For reference, there is a sub-branch of drugs such as vitamin supplements/food additives, which may be considered an area where people spend their discretionary income, so a price hike there would be reasonable; but for life saving drugs such as insulin this is questionable. Also needed to be noticed that existing political incentives around cash cows are very difficult to dismantle and would likely need decades of work, especially in economically stable democracies.

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    easing regulations does not lower drug price. Regulatinng drug price reduce drug price that is the difference between the US and almost all europeen countries. It's the private sector that "squeezes money from people for whom it is a matter of life and death" not the governement Sep 11, 2023 at 10:22
  • A healthy inflow of new private sector companies offering competitive prices is what causes prices to be low, and that is what usually disrupted by overregulation.
    – alamar
    Sep 11, 2023 at 11:13
  • that true usually but that is not the reason for the high price of healthcare in the us and on the contrary the regulation are the reason for the "low" price in europe beside drug will always be a sector where regulation are a necessite because when companies are not required to take precaution they do not and that usualy result in death Sep 11, 2023 at 12:31

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