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Exploring the effectiveness of demand-side retail pharmaceutical expenditure reforms: cross-country evidence from weighted-average least squares estimation

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  • Berger, Michael
  • Pock, Markus
  • Reiss, Miriam
  • Röhrling, Gerald
  • Czypionka, Thomas

Abstract

Increasing expenditures on retail pharmaceuticals bring a critical challenge to the financial stability of healthcare systems worldwide. Policy makers have reacted by introducing a range of measures to control the growth of public pharmaceutical expenditure (PPE). Using panel data on European and non-European OECD member countries from 1990 to 2015, we evaluate the effectiveness of six types of demand-side expenditure control measures including physician-level behaviour measures, system-level price-control measures and substitution measures, alongside a proxy for cost-sharing and add a new dimension to the existing empirical evidence hitherto based on national-level and meta-studies. We use the weighted-average least squares regression framework adapted for estimation with panel-corrected standard errors. Our empirical analysis suggests that direct patient cost-sharing and some—but not all—demand-side measures successfully dampened PPE growth in the past. Cost-sharing schemes stand out as a powerful mechanism to curb PPE growth, but bear a high risk of adverse effects. Other demand-side measures are more limited in effect, though may be more equitable. Due to limitations inherent in the study approach and the data, the results are only explorative.

Suggested Citation

  • Berger, Michael & Pock, Markus & Reiss, Miriam & Röhrling, Gerald & Czypionka, Thomas, 2023. "Exploring the effectiveness of demand-side retail pharmaceutical expenditure reforms: cross-country evidence from weighted-average least squares estimation," LSE Research Online Documents on Economics 116928, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:116928
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    More about this item

    Keywords

    health expenditure; panel data models; pharmaceutical policy; public pharmaceutical expenditure; weighted-average least squares;
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    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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