Profit-Seeking Behavior of Medical Providers and Generic Competition in the Pharmaceutical Market: Evidence from Taiwan

Liu Ya-Ming () and Hsieh Chee-Ruey ()
Additional contact information
Liu Ya-Ming: Department of Economics, National Cheng Kung University, No. 1 University Road, Social Science Building 8F Tainan, Tainan 70101, Taiwan
Hsieh Chee-Ruey: Institute of Economics, Academia Sinica, Taipei, Taiwan

The B.E. Journal of Economic Analysis & Policy, 2014, vol. 14, issue 1, 241-275

Abstract: Promoting competition between brand-name and generic drugs has long been recognized as an approach adopted to save on health care costs. However, there are substantial variations in the extent of the generic competition across countries. This study empirically estimates the determinants of the generic market share in Taiwan, where medical providers are in a position to profit directly from the sale of prescription drugs. Our empirical results point out that the profit-seeking behavior of medical providers plays an important and dominant role behind generic competition in the pharmaceutical market. As a result, there is a positive association between the generic-to-brand price ratio and the generic market share in Taiwan’s pharmaceutical market, which contrasts with the conventional empirical finding that the relationship between the generic-to-brand price ratio and generic market share is negative. An important implication of our study is that the profit-seeking behavior of medical providers undermines the policy effectiveness of using generic competition as the cost containment strategy in the health care market.

Keywords: generic competition; profit-seeking behavior; National Health Insurance; pharmaceuticals (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/bejeap-2013-0066 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejeap:v:14:y:2014:i:1:p:241-275:n:8

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejeap/html

DOI: 10.1515/bejeap-2013-0066

Access Statistics for this article

The B.E. Journal of Economic Analysis & Policy is currently edited by Hendrik Jürges and Sandra Ludwig

More articles in The B.E. Journal of Economic Analysis & Policy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().