Impact of National Drug Price Negotiation policy on the innovation performance of biopharmaceutical industry in 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 2018 Q1 to 2023 Q4. 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 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.