This study investigates the impact of the 2012 drug price reduction policy on the behavior and performance of pharmaceutical companies. Using a dataset that merges pharmaceutical firms’ production records for individual drugs with reimbursement price ceilings, we measure the intensity of each firm’s exposure to the policy shock and apply a robust difference-in-differences (DID) estimation method. The empirical results show that firms exposed to the drug price reduction experienced a relative decline in sales compared to unexposed firms and an increase in the production share of National Health Insurance (NHI) non-covered drugs not subject to the price reduction. The simulation analysis shows that the policy did not achieve its goal of increasing consumer benefits through lower drug prices and saving the NHI budget due to changes in the production mix of pharmaceutical firms after the policy was implemented.