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Regulation and competition in the Taiwanese pharmaceutical market under national health insurance

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  • Liu, Ya-Ming
  • Yang, Yea-Huei Kao
  • Hsieh, Chee-Ruey

Abstract

This article investigates the determinants of the prices of pharmaceuticals and their impact on the demand for prescription drugs in the context of Taiwan's pharmaceutical market where medical providers earn profit directly from prescribing and dispensing drugs. Based on product-level data, we find evidence that the profit-seeking behavior of the medical providers in the prescription drug market transfers the force of competition from the unregulated wholesale market to the regulated retail market and hence market competition still plays an important role in the determination of the regulated price. We also find that the profit-seeking behavior plays a similar role to advertising in that it increases the brand loyalty and hence lowers price elasticity. An important implication of our study is that the institutional features in the pharmaceutical market matter in shaping the nature of pharmaceutical competition and the responsiveness of pharmaceutical consumption with respect to changes in price.

Suggested Citation

  • Liu, Ya-Ming & Yang, Yea-Huei Kao & Hsieh, Chee-Ruey, 2012. "Regulation and competition in the Taiwanese pharmaceutical market under national health insurance," Journal of Health Economics, Elsevier, vol. 31(3), pages 471-483.
    • Handle: RePEc:eee:jhecon:v:31:y:2012:i:3:p:471-483
    DOI: 10.1016/j.jhealeco.2012.03.003
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    Cited by:

    1. Daniel Burkhard & Christian P. R. Schmid & Kaspar Wüthrich, 2019. "Financial incentives and physician prescription behavior: Evidence from dispensing regulations," Health Economics, John Wiley & Sons, Ltd., vol. 28(9), pages 1114-1129, September.
    2. Chee-Ruey Hsieh & Ya-Ming Liu & Chia-Lin Chang, 2013. "Endogenous technological change in medicine and its impact on healthcare costs: evidence from the pharmaceutical market in Taiwan," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(2), pages 287-295, April.
    3. Meng‐Chi Tang, 2023. "A structural analysis of physician agency and pharmaceutical demand," Health Economics, John Wiley & Sons, Ltd., vol. 32(7), pages 1453-1477, July.
    4. Meng-Chi Tang & Yi-Nong Wu, 2020. "Medical providers as double agents in a universal health care system: evidence from generic pharmaceutical adoption in Taiwan," Empirical Economics, Springer, vol. 59(1), pages 169-203, July.

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    More about this item

    Keywords

    Price regulation; Generic competition; Therapeutic competition; Price elasticy; Demand for prescription drugs;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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