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The determinants of the adoption of pharmaceutical innovation: Evidence from Taiwan

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

Abstract

In recent years, a substantial amount of technological progress in medicine has taken the form of pharmaceutical innovation. This paper uses the launch of a series of new drugs designed for treating type 2 diabetic patients as an example to investigate the determinants that affect the diffusion of new medical technology. Based on prescription-level data that are obtained from the national health insurance program in Taiwan, we find that the probability of prescribing new drugs declines as more competing products enter the pharmaceutical market. Meanwhile, physicians are less likely to prescribe new drugs to treat their patients as the provider market becomes less concentrated. These results suggest that the providers' incentives for cost reduction dominate incentives for quality improvement as markets become more competitive and hence an increase in market competition is associated with a decrease in the diffusion of new drugs. As a result, access to new drugs is not uniform among patients in a country with universal coverage for prescription drugs. An important implication of our study is that profit-seeking behavior among providers can become an access barrier to new medical technology.

Suggested Citation

  • Liu, Ya-Ming & Kao Yang, Yea-Huei & Hsieh, Chee-Ruey, 2011. "The determinants of the adoption of pharmaceutical innovation: Evidence from Taiwan," Social Science & Medicine, Elsevier, vol. 72(6), pages 919-927, March.
    • Handle: RePEc:eee:socmed:v:72:y:2011:i:6:p:919-927
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    Cited by:

    1. Liu, Ya-Ming & Cheng, Jur-Shan, 2012. "Determinants of generic entry in the regulated Taiwanese prescription drug market," Health Policy, Elsevier, vol. 108(2), pages 228-235.
    2. Ronja Flemming & Franziska Frölich & Norbert Donner‐Banzhoff & Leonie Sundmacher, 2023. "Diffusion of a new drug among ambulatory physicians—The impact of patient pathways," Health Economics, John Wiley & Sons, Ltd., vol. 32(4), pages 970-982, April.
    3. Ya‐Ming Liu & Chee‐Ruey Hsieh, 2012. "New drugs and the growth of health expenditure: evidence from diabetic patients in Taiwan," Health Economics, John Wiley & Sons, Ltd., vol. 21(5), pages 496-513, May.
    4. 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.

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