Journal
JOURNAL OF HEALTH ECONOMICS
Volume 28, Issue 2, Pages 341-349Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jhealeco.2008.10.009
Keywords
Incentives; Prescription decision; Price regulation; Generic drugs; Brand-name drugs
Funding
- National Science Council [NSC95-2415-H-006-006]
- Department of Health [DOH96-TD-D-113-026]
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This paper tests the hypothesis of whether or not financial incentives affect a physician's prescription decision on the choice of generic versus brand-name drugs within a system in which physicians prescribe and dispense drugs. By using data obtained from Taiwan and focusing on diabetic patients, Our empirical results provide several consistent findings in Support of the hypothesis that profit incentives do affect the physician's prescribing decision, suggesting that physicians act as imperfect agents. An important implication of our findings is that rent seeking for profit margin between the reimbursement and the acquisition price instead of reducing Costs is the major driving force behind generic substitution. As a result, the providers instead of the payers or Consumers reap the financial benefits of generic substitution. (C) 2008 Elsevier B.V. All rights reserved.
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