IDEAS home Printed from https://ideas.repec.org/a/bpj/bejeap/v11y2011i2n1.html
   My bibliography  Save this article

Pecuniary and Non-Pecuniary Incentives in Prescription Pharmaceuticals: The Case of Statins

Author

Listed:
  • Limbrock Frank

    (Kellogg School of Management, Northwestern University)

Abstract

Health insurance companies seek to influence the type of care patients receive in order to increase value in relation to cost. Traditional health insurance relies primarily on price mechanisms to affect patients' and doctors' choices, whereas managed care plans such as HMOs, as the name implies, affect choices directly thorough various forms of "managed care." I investigate the effect of pecuniary and non-pecuniary incentives used by health insurance companies to influence prescription decisions in an important class of pharmaceuticals, cholesterol-lowering drugs called Statins, using a discrete-choice demand model on patient-level data. My results suggest that HMOs are significantly more successful at influencing drug choice than traditional indemnity insurers. In conjunction with volume-contingent discounts given by drug producers, this could explain part of the cost-effectiveness differential between HMOs and traditional indemnity insurers.

Suggested Citation

  • Limbrock Frank, 2011. "Pecuniary and Non-Pecuniary Incentives in Prescription Pharmaceuticals: The Case of Statins," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-30, January.
    • Handle: RePEc:bpj:bejeap:v:11:y:2011:i:2:n:1
    DOI: 10.2202/1935-1682.2665
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1935-1682.2665
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1935-1682.2665?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mark Duggan & Fiona Scott Morton, 2010. "The Effect of Medicare Part D on Pharmaceutical Prices and Utilization," American Economic Review, American Economic Association, vol. 100(1), pages 590-607, March.
    2. Ernst R. Berndt, 2002. "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 45-66, Fall.
    3. Ching‐To Albert Ma & Thomas G. Mcguire, 2002. "Network Incentives in Managed Health Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(1), pages 1-35, March.
    4. Gaynor Martin & Li Jian & Vogt William B, 2007. "Substitution, Spending Offsets, and Prescription Drug Benefit Design," Forum for Health Economics & Policy, De Gruyter, vol. 10(2), pages 1-33, July.
    5. Judith K. Hellerstein, 1998. "The Importance of the Physician in the Generic Versus Trade-Name Prescription Decision," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 108-136, Spring.
    6. Katherine Ho, 2009. "Insurer-Provider Networks in the Medical Care Market," American Economic Review, American Economic Association, vol. 99(1), pages 393-430, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kate Ho & Ariel Pakes, 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians," American Economic Review, American Economic Association, vol. 104(12), pages 3841-3884, December.
    2. Ding, Yu & Liu, Chenyuan, 2021. "Alternative payment models and physician treatment decisions: Evidence from lower back pain," Journal of Health Economics, Elsevier, vol. 80(C).
    3. Mariana Carrera & Dana Goldman & Geoffrey Joyce, 2013. "Heterogeneity in Cost-Sharing and Cost-Sensitivity, and the Role of the Prescribing Physician," NBER Working Papers 19186, National Bureau of Economic Research, Inc.
    4. Sacks, Daniel W., 2018. "Why do HMOs spend less? Patient selection, physician price sensitivity, and prices," Journal of Public Economics, Elsevier, vol. 168(C), pages 146-161.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chorniy, Anna & Miller, Daniel & Tang, Tilan, 2020. "Mergers in Medicare Part D: Assessing market power, cost efficiencies, and bargaining power," International Journal of Industrial Organization, Elsevier, vol. 68(C).
    2. 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.
    3. Regan, Tracy L., 2008. "Generic entry, price competition, and market segmentation in the prescription drug market," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 930-948, July.
    4. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    5. Boone, Jan, 2019. "Health provider networks with private contracts: Is there under-treatment in narrow networks?," Journal of Health Economics, Elsevier, vol. 67(C).
    6. Darius Lakdawalla & Wesley Yin, 2015. "Insurers’ Negotiating Leverage and the External Effects of Medicare Part D," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 314-331, May.
    7. Herr, A. & Suppliet, M., 2011. "Co-Payment Exemptions and Reference Prices: an Empirical Study of Pharmaceutical Prices in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 11/18, HEDG, c/o Department of Economics, University of York.
    8. Glazer Jacob & Huskamp Haiden A. & McGuire Thomas G., 2012. "A Prescription for Drug Formulary Evaluation: An Application of Price Indexes," Forum for Health Economics & Policy, De Gruyter, vol. 15(2), pages 1-26, March.
    9. Darius Lakdawalla & Wesley Yin, 2009. "Insurer Bargaining and Negotiated Drug Prices in Medicare Part D," NBER Working Papers 15330, National Bureau of Economic Research, Inc.
    10. Jennifer Rice, 2009. "The influence of managed care on generic prescribing rates: an analysis of HMO physicians," Applied Economics, Taylor & Francis Journals, vol. 43(7), pages 787-796.
    11. Newhouse, Joseph Paul & Berndt, Ernst R., 2010. "Pricing and Reimbursement in U.S. Pharmaceutical Markets," Scholarly Articles 4450127, Harvard Kennedy School of Government.
    12. Königbauer, Ingrid, 2006. "Dealing with Rising Health Care Costs: The Case of Pharmaceuticals," Munich Dissertations in Economics 5640, University of Munich, Department of Economics.
    13. Mariana Carrera & Dana Goldman & Geoffrey Joyce, 2013. "Heterogeneity in Cost-Sharing and Cost-Sensitivity, and the Role of the Prescribing Physician," NBER Working Papers 19186, National Bureau of Economic Research, Inc.
    14. Berndt Ernst R. & McGuire Thomas & Newhouse Joseph P., 2011. "A Primer on the Economics of Prescription Pharmaceutical Pricing in Health Insurance Markets," Forum for Health Economics & Policy, De Gruyter, vol. 14(2), pages 1-30, November.
    15. Jihui Chen, 2019. "The Effects of Competition on Prescription Payments in Retail Pharmacy Markets," Southern Economic Journal, John Wiley & Sons, vol. 85(3), pages 865-898, January.
    16. Kai Yeung & Anirban Basu & Ryan N. Hansen & Sean D. Sullivan, 2018. "Price elasticities of pharmaceuticals in a value based‐formulary setting," Health Economics, John Wiley & Sons, Ltd., vol. 27(11), pages 1788-1804, November.
    17. Dag Dalen & Kari Furu & Marilena Locatelli & Steinar Strøm, 2011. "Generic substitution: micro evidence from register data in Norway," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(1), pages 49-59, February.
    18. Leemore Dafny, 2008. "Are Health Insurance Markets Competitive?," NBER Working Papers 14572, National Bureau of Economic Research, Inc.
    19. Whaley, Christopher M. & Brown, Timothy T., 2018. "Firm responses to targeted consumer incentives: Evidence from reference pricing for surgical services," Journal of Health Economics, Elsevier, vol. 61(C), pages 111-133.
    20. Sebastian Linde & Brandon Norton & Ralph Siebert, 2019. "The Effect of Bargaining Power Determinants on Pharmaceutical Prices," CESifo Working Paper Series 7988, CESifo.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:11:y:2011:i:2:n:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.