The impact of national centralized drug procurement policy on firm performance: Evidence from Chinese pharmaceutical firms

China's national centralized drug procurement policy, as a form of group purchasing, has successfully improved drug affordability and accessibility through significant price reductions. While prior studies have examined the long-term policy effects on pharmaceutical firms, critical gaps exist in understanding the immediate financial consequences for pharmaceutical firms, and how firm characteristics, supply chain factor, and product market factor moderate the relationship. To address this gap, we leverage data from the China Stock Market and Accounting Research (CSMAR) database and the Cninfo and utilize an event study methodology to analyze the policy impact on the financial performance of 205 Chinese pharmaceutical firms in the stock market. The results show that the policy shift led to a significant decrease in firm value by −2.67% on the day of the event, equating to approximately $661 million. Moreover, firms exhibiting higher innovation or sales intensity tend to experience a more pronounced negative impact, while those with a more concentrated supply chain are less vulnerable to regulatory changes. However, the positive role of product internationalization is not significant. The post-hoc analysis reveals that both state-owned and non-state-owned firms experienced notable declines in stock values and this adverse effect has no significant difference between the two kinds of firms. Moreover, the long-term effect analysis indicates that this negative effect can last for one year in the stock market. Our findings shed light on both firm managers and policymakers in developing regulatory adaptation strategies and responding to the impact of this policy shift.