Exploring the effectiveness of demand-side retail pharmaceutical expenditure reforms: cross-country evidence from weighted-average least squares estimation

Michael Berger, Markus Pock, Miriam Reiss, Gerald Röhrling and Thomas Czypionka

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Increasing expenditures on retail pharmaceuticals bring a critical challenge to the financial stability of healthcare systems worldwide. Policy makers have reacted by introducing a range of measures to control the growth of public pharmaceutical expenditure (PPE). Using panel data on European and non-European OECD member countries from 1990 to 2015, we evaluate the effectiveness of six types of demand-side expenditure control measures including physician-level behaviour measures, system-level price-control measures and substitution measures, alongside a proxy for cost-sharing and add a new dimension to the existing empirical evidence hitherto based on national-level and meta-studies. We use the weighted-average least squares regression framework adapted for estimation with panel-corrected standard errors. Our empirical analysis suggests that direct patient cost-sharing and some—but not all—demand-side measures successfully dampened PPE growth in the past. Cost-sharing schemes stand out as a powerful mechanism to curb PPE growth, but bear a high risk of adverse effects. Other demand-side measures are more limited in effect, though may be more equitable. Due to limitations inherent in the study approach and the data, the results are only explorative.

Keywords: health expenditure; panel data models; pharmaceutical policy; public pharmaceutical expenditure; weighted-average least squares (search for similar items in EconPapers)
JEL-codes: I18 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2023-03-01
New Economics Papers: this item is included in nep-hea
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Published in International journal of Health Economics and Management, 1, March, 2023, 23(1), pp. 149 - 172. ISSN: 2199-9023

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