Rents for pills: Financial incentives and physician behavior

Müller, Tobias; Schmid, Christian; Gerfin, Michael (2022). Rents for pills: Financial incentives and physician behavior Journal of health economics, 87, p. 102711. Elsevier 10.1016/j.jhealeco.2022.102711

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We study the impact of financial incentives on the prescription behavior of physicians based on a recent reform in two large Swiss cities. The reform opened up an additional income channel for physician by allowing them to earn a markup on drugs they prescribe to their patients. We find that the reform leads to an increase in drug costs by about 4-5% per patient translating to significantly higher physician earnings. The revenue increase can be decomposed into a substitution and rent-seeking component. Our analysis indicates that physicians engage in rent-seeking by substituting larger with smaller packages and by cherry-picking more profitable brands. Although patient health is not sacrificed, the rent-seeking behavior results in unnecessary costs for society.

Item Type:	Journal Article (Original Article)
Division/Institute:	School of Health Professions School of Health Professions > Institute of Health Economics and Health Policy
Name:	Müller, Tobias; Schmid, Christian and Gerfin, Michael
ISSN:	0167-6296
Publisher:	Elsevier
Language:	English
Submitter:	Tobias Benjamin Müller
Date Deposited:	20 Dec 2022 15:52
Last Modified:	19 Mar 2024 15:25
Publisher DOI:	10.1016/j.jhealeco.2022.102711
Uncontrolled Keywords:	financial incentives, rent-seeking, prescription behavior, health spending
ARBOR DOI:	10.24451/arbor.18488
URI:	https://arbor.bfh.ch/id/eprint/18488