A significant number of procurements in both public and private sectors have adopted the practice of splitting the award among multiple bidders in an auction, as an alternative to the one-winner-take-all approach. This aims to encourage participation from small firms and reduce dependency on a single supplier. One prominent example is China’s national drug procurement multiple-winner auction, where the drug supply is divided among several winners, increasing in proportion to the number of participants. Given the societal importance of drug prices, it is crucial to properly examine the rationale for using split-award auctions. However, there is limited theoretical and empirical guidance available in the literature. This paper investigates the competitive impact of split-award auctions on key outcomes, such as participation and procurement costs, using both a theoretical framework and empirical evidence. Theoretically, it demonstrates that split-award auctions consistently boost participation but also increase expected procurement costs in almost all instances. The expected procurement cost decreases only if the split-award auction raises participation from 0 to 1 compared to the winner-take-all auction. Empirically, the paper estimates the direction and magnitude of the effects on participation and expected procurement costs using drug procurement data. The findings reveal that split-award auctions moderately increase average participation by 0.85 bidders (17%), but significantly raise the unit expected procurement cost by 4 CNY (38%). Almost half of the overall increase in expected procurement costs stems from reallocating production to more expensive bidders, while the other half results from increased markups charged by bidders in response to this reallocation.