OBJECTIVES: In the past 20 years, China placed directly strict government control on pharmaceutical pricing. A new policy which required deregulation on drug prices was introduced in China in 2015. The objective of this study was to measure the impact of this price formation mechanism reform on medicine availability drawing on Chinese experience.

METHODS: Nerlove supply response model was used for empirical analysis based on expectation theory. Product-level data were obtained from provincial centralized purchase platform in Shandong province, China from 2012 to 2017.

RESULTS: The drug price in the lag period (0.046, p<0.01), the generic competition (0.404, p<0.01) and the drug demand in the lag period (0.773, p<0.01) had significant positive impact on the current drug supply.

CONCLUSIONS:The price expectation and potential market share were the main basis for drug supply decision. The establishment of market-determined price mechanism in China could release clear market expectation, which was conducive to improving the medicine availabillity.