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Does physicians' compensation affect the probability of their vetoing generic substitution?

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  • Granlund, David

    (Department of Economics, Umeå University)

Abstract

Physicians' decisions whether or not to veto generic substitution were analyzed using a sample of 350,000 pharmaceutical prescriptions. Point estimates show that - compared to county-employed physicians on salary - physicians working at private practices were 50-80% more likely to veto substitution. The results indicate that this difference is explained by the difference in direct cost associated with substitution, rather than by private physicians' possibly stronger incentives to please their patients. Also, the probability of a veto was found to increase as patients' copayments decreased. This might indicate moral hazard in insurance, though other explanations are plausible.

Suggested Citation

  • Granlund, David, 2008. "Does physicians' compensation affect the probability of their vetoing generic substitution?," Umeå Economic Studies 729, Umeå University, Department of Economics, revised 26 Mar 2008.
    • Handle: RePEc:hhs:umnees:0729
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    References listed on IDEAS

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    1. David Whynes & Darrin Baines & Keith Tolley, 1997. "Prescribing costs in UK general practice: the impact of hard budget constraints," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 393-399.
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    5. Granlund, David & Rudholm, Niklas, 2007. "Consumer Information and Pharmaceutical Prices: Theory and Evidence," Umeå Economic Studies 709, Umeå University, Department of Economics.
    6. William H. Crown & Ernst R. Berndt & Onur Baser & Stan N. Finkelstein & Whitney P. Witt & Jonathan Maguire & Kenan E. Haver, 2004. "Benefit Plan Design and Prescription Drug Utilization Among Asthmatics: Do Patient Copayments Matter?," NBER Chapters, in: Frontiers in Health Policy Research, Volume 7, pages 95-128, National Bureau of Economic Research, Inc.
    7. Granlund, David & Rudholm, Niklas, 2007. "Consumer Information and Pharmaceutical Prices: Theory and Evidence," HUI Working Papers 8, HUI Research.
    8. Dusheiko, Mark & Gravelle, Hugh & Jacobs, Rowena & Smith, Peter, 2006. "The effect of financial incentives on gatekeeping doctors: Evidence from a natural experiment," Journal of Health Economics, Elsevier, vol. 25(3), pages 449-478, May.
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    Cited by:

    1. Granlund, David & Rudholm, Niklas, 2008. "Consumer Loyalty in the Swedish Pharmaceuticals Market," HUI Working Papers 17, HUI Research.

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    More about this item

    Keywords

    doctors; salary; fee for service; moral hazard; prescriptions; drugs;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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