Should We Prevent Off-Label Drug Prescriptions? Empirical Evidence from France

Tuba Tunçel
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Tuba Tunçel: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: After a drug obtains marketing authorization, the usage depends on the regulation of off-label prescriptions for unapproved indications. We investigate the impact of off-label prescription regulation on physicians' behavior, patients' health, treatment costs, and pharmaceutical firms' pricing with a structural demand and supply model. Exploiting rich panel data on physicians' activities and office visits in France over nine years, we use a model of prescription choice and health outcomes with unobserved patient-level heterogeneity. We identify the demand for on-label and off-label drugs and the effect of prescription choice on health outcomes. On the supply side, we use a Nash-in-Nash bargaining model between the government and the pharmaceutical companies that allows the partial identification of the marginal costs of drugs. Counterfactual simulations show that when we remove off-label drugs from the choice set of physicians, substitution to on-label drugs at constant prices would lead to an increase of 15% in the expenditure on prescription drugs. If we allow bargaining adjustment on drug prices under a ban on off-label prescriptions, the ban would further increase the treatment cost, by 26%, without improving health outcomes.

Keywords: Physician Behavior; Prescription Drugs; Off-Label Drugs; Regulation; Bargaining (search for similar items in EconPapers)
Date: 2024-05-30
New Economics Papers: this item is included in nep-hea
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Published in Review of Economic Studies, 2024, ⟨10.1093/restud/rdae060⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04758877

DOI: 10.1093/restud/rdae060

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