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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
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    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.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 31 (2012)
    Issue (Month): 3 ()
    Pages: 471-483

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    Handle: RePEc:eee:jhecon:v:31:y:2012:i:3:p:471-483

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    Web page: http://www.elsevier.com/locate/inca/505560

    Related research

    Keywords: Price regulation; Generic competition; Therapeutic competition; Price elasticy; Demand for prescription drugs;

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    References

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    Cited by:
    1. Hsieh, Chee-Ruey & Liu, Ya-Ming & Chang, Chia-Lin, 2011. "Endogenous technological change in medicine and its impact on healthcare costs: evidence from the pharmaceutical market in Taiwan," MPRA Paper 35147, University Library of Munich, Germany.

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