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Should We Prevent Off-Label Drug Prescriptions? Empirical Evidence from France

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  • Tuncel, Tuba

Abstract

After a drug obtains marketing authorization, the usage depends on the regulation of off-label pre-scriptions for unapproved indications. We investigate the impact of off-label prescription regulation on physicians’ behavior, patients’ health, treatment costs, and pharmaceutical firms’ pricing with a structural demand and supply model. Exploiting rich panel data on physicians’ activities and office visits in France over nine years, we use a model of prescription choice and health outcomes with unobserved patient-level heterogeneity. We identify the demand for on-label and off-label drugs and the effect of prescription choice on health outcomes. On the supply side, we use a Nash-in-Nash bargaining model between the government and the pharmaceutical companies that allows the partial identification of the marginal costs of drugs. Counterfactual simulations show that when we remove off-label drugs from the choice set of physicians, substitution to on-label drugs at constant prices would lead to an increase of 15% in the expenditure on prescription drugs. If we allow bargaining adjustment on drug prices under a ban on off-label prescriptions, the ban would further increase the treatment cost, by 26%, without improving health outcomes.

Suggested Citation

  • Tuncel, Tuba, 2022. "Should We Prevent Off-Label Drug Prescriptions? Empirical Evidence from France," TSE Working Papers 22-1383, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:127510
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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