ABSTRACT
This paper firstly analyses the sales and purchase contracts in the procurement of drugs in public hospitals, and then points out the market failure in the two contracts. After the implementation of administrative measures such as government pricing, administrative price reduction, price increase, centralized bidding and purcha-sing, various drug procurement stakeholders have adopted various game behaviors, and government procurement and price formation have appeared in government hospitals, not-neglecting the formation of the price ofGovernment fail-ure. The future price formation in public hospitals should be the market pricing under the limited government regu-lation, and increase the medical insurance institutions' price negotiation and the public hospitals' participation degree in the bidding process based on maintaining the centralized bidding and purchasing and zero administrative rate.