Healthy Skepticism Library item: 7719
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
Okunade AA, Suraratdecha C.
The pervasiveness of pharmaceutical expenditure inertia in the OECD countries.
Soc Sci Med 2006 Jul; 63:(1):225-38
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VBF-4J624TM-1&_user=10&_coverDate=07%2F31%2F2006&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=1596f3d919f2591333460cb8c9cb073a
Abstract:
This paper constructs and estimates an economic model for testing statistically the strength of possible ‘expenditure inertia’ as a plausible reason for rising drug expenditures of the Organization for Economic Cooperation and Development (OECD) countries. The ethical drugs sector in the OECD health care systems is increasingly targeted as the major culprit in the rising cost. Using multiple regression analysis, and the maximum likelihood estimation method, the data of each country (taken from OECD Health Data, 1997) were first tested for functional form optimality with the Box-Cox power family transformations model. Drug expenditure elasticities, at data means, were computed using each country’s optimal regression model estimates. The results indicate that the traditionally fitted a priori limited functional form models (e.g., linear, log-log) are not globally consistent with data across countries. The effect of a one-period lagged real per-capita drug expenditure (capturing inertia or habit persistence) on current period real per-capita prescription expenditure is statistically significant in most countries. Pharmaceutical demands are inelastic, and tend to behave like a necessity, as expected. Since the significant effects of economic, demographic, and other drivers of high drug spending differ across countries, country-specific implications and policy suggestions for cost controls ought to differ.
Keywords:
OECD countries; Rising pharmaceutical spending; Spending inertia; Expenditure elasticities; Health system policies
Publication Types:
Comparative Study
Research Support, Non-U.S. Gov't
MeSH Terms:
Aged
Developed Countries
Drug Costs*
Female
Health Expenditures*
Health Policy*
Humans
Likelihood Functions
Models, Econometric
Multivariate Analysis
Regression Analysis
