Healthy Skepticism Library item: 14517

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Journal Article

Miao-Sheng C, Yu-Ti S.
Pricing of prescription drugs and its impact on physicians' choice behavior.
Health Care Manag Sci 2008 Sep; 11:(3):288-95
http://www.ncbi.nlm.nih.gov/pubmed/18826006

Abstract:

This research presents an analysis of Taiwan’s health care market with the focus on the pricing of prescription drugs and its impact on physicians’ choice behavior. Since the advent of Taiwan’s national health insurance, with the competent authority being Bureau of National Health Insurance (BNHI), hospitals are allowed to sell prescription drugs to patients at prices above the purchasing prices, so each prescription drug has two prices: one at which drugs are sold to hospitals; the other which BNHI reimbursement to hospitals. The margin between the different prices is the sales discount that pharmaceutical companies offer to the hospitals. We find that sales discount has a great impact on physicians’ choice behavior: i.e., physicians are price-sensitive to prescription drugs. In addition, it is found that too high a sales discount of a prescription drug would result in a too low weighted average price of that drug sold; thus BNHI would be more likely to adjust downward the rate it reimbursement to the hospital. This presents a sales strategy problem to pharmaceutical companies. To solve this, we use the distribution of physicians’ evaluations of prescription drugs to establish a profit maximization model in hopes of helping companies to price drugs and find the optimal promotion expending. Ten popular prescription drugs are used in this research as examples.

Keywords:
MeSH Terms: Choice Behavior Costs and Cost Analysis Drug Industry/economics* Humans Pharmaceutical Preparations/economics* Physician's Practice Patterns/economics* State Health Plans Taiwan Substances: Pharmaceutical Preparations

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Far too large a section of the treatment of disease is to-day controlled by the big manufacturing pharmacists, who have enslaved us in a plausible pseudo-science...
The blind faith which some men have in medicines illustrates too often the greatest of all human capacities - the capacity for self deception...
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we need a stern, iconoclastic spirit which leads, not to nihilism, but to an active skepticism - not the passive skepticism, born of despair, but the active skepticism born of a knowledge that recognizes its limitations and knows full well that only in this attitude of mind can true progress be made.
- William Osler 1909