Do indicators for the proportion of pharmaceutical spending alleviate the burden of medical expenditure? Evidence from provincial panel-data in China, 2010-2019

Background: The current study aims to empirically evaluate the direct relationship between the proportion of pharmaceutical spending and total medical expenditure in China in a recent decade period. Methods: A two-way fixed-effect model was established to estimate the relationship between the proportion of pharmaceutical spending and total medical expenditure using the balanced panel data for thirty provincial-level administrative regions in mainland China from 2010 to 2019. Results: The proportion of pharmaceutical spending was significantly positively related to inpatient and outpatient expenditure, with coefficients of 0.30 (p = 0.014) and 0.58 (p = 0.002), respectively. This positive correlation was not significant in the eastern regions, likely due to the unexpected supply-side coping behaviors brought about by the compulsory control of the proportion of pharmaceutical spending. We investigated the improvement of service efficiency could significantly alleviate the burden of medical expenses. Conclusion: Our research provided empirical evidence for the necessity of using the proportion of pharmaceutical spending as a cost control indicator and showed the factors that may affect the amount of medical expenditure, emphasizing the significance of improving the efficiency of resource utilization to compensate for the unintended behaviors and effects caused by single index assessment.