OBJECTIVES: The “second negotiation” is a new health policy proposed by Chinese National Development and Reform Commission in 2013. It allows hospitals to further negotiate the drug price with manufacturers after provincial negotiation. The policy’s appropriateness to control drugs expenditure is debatable; therefore, our study aimed to discuss potential advantages and disadvantages of this policy.

METHODS: A literature review was performed using Chinese databases (CNKI, Wanfang, and CQVIP), government official websites, and grey literature. Papers on second negotiation were identified and information on its rationale, implementation level, and potential outcome were extracted.

RESULTS: Discrepant points of view were identified. Supporters believe that second negotiation can help to decrease the hospital expenses, to increase transparency of price setting of hospital products, to avoid under-the-table kickbacks for physicians, and to control over-prescription of expensive drugs. However, others argue that second negotiation is against the transparency principle of the new medical reform program. The drug prices in large hospitals may be substantially lower than in small hospitals, due to differential negotiation power. Additionally, it may cause a shortage or a lower quality of essential drugs as manufacturers may supply in priority high cost acquisition hospitals. Some provinces are very proactive in exploring second negotiation, such as Chongqing and Anhui provinces, whereas others are resistant, such as Liaoning and Jiangsu provinces. The magnitude of implementing second negotiation could not be assessed due to unavailable accurate numbers of hospitals practicing this policy.

CONCLUSIONS: The pricing mechanism in China is changing. After new mechanisms of price control were introduced in the reform of June 2015; several provinces are piloting the “second negotiation.” Pharmaceutical companies and payers need to prepare for these new reforms and their potential impact. Further studies assessing their impact on adopters and non-adopters are needed.