Centralized drug procurement and inequality: Therapeutic and geographic spillovers from China's national volume-based procurement

China's National Volume-Based Procurement (NVBP) policy, introduced in 2018, aims to reduce pharmaceutical prices by exchanging large guaranteed purchase volumes for substantial price concessions on selected drugs. While existing research documents substantial price reductions for contracted drugs, less is known about how this selective price regulation affects pricing behavior in the broader pharmaceutical market. Using public hospital procurement data and exploiting variation in the timing of NVBP implementation, this study examines spillover effects on prices, sales quantities, and revenues of non-contracted drugs. We find that NVBP is associated with significant increases in both prices and revenues of non-contracted drugs. These effects are consistent with strategic margin reallocation by multi-product firms seeking to offset revenue losses from contracted products. Spillovers are not uniform. They are larger in chronic-disease therapeutic areas, where demand is more predictable, and substitution is limited, and in poorer regions, where market competition and regulatory capacity are weaker. Additional analyses show that spillover effects are amplified in more concentrated therapeutic markets, suggesting that market structure constrains competitive responses. The findings highlight an important trade-off in centralized procurement policies. While NVBP successfully reduces prices for targeted medicines, selective price regulation may generate unintended spillovers in the broader pharmaceutical market.