TY - JOUR
T1 - Understanding profit margins of medical providers from prescription drugs
T2 - Evidence from Taiwan
AU - Liu, Ya Ming
N1 - Publisher Copyright:
© The Author(s) 2019. Published by Oxford University Press on behalf of Royal Society of Tropical Medicine and Hygiene. This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
PY - 2020
Y1 - 2020
N2 - Background: This study empirically estimates the magnitude and associated determinants of profit margins that medical providers earn from prescription drugs based on Taiwan's pharmaceutical market. Methods: Our main data set is from the population-based claims data compiled by the National Health Insurance Research Database covering three waves of price adjustment: July-December 2004, October 2007-September 2008 and October 2009-September 2010. Only drugs whose reimbursement prices were adjusted using the R-zone formula were used as samples for this study. By calculating the difference between retail and wholesale prices for 796 pharmaceutical products, we can estimate the profit margin determinants using the regression model. Results: We found evidence that suppliers of generic drugs tend to offer larger discounts to medical providers than suppliers of brand-name drugs. In addition, the countervailing power of wholesale pharmaceuticals, as measured by the discount rate offered by pharmaceutical manufacturers, is positively associated with the degree of competition within the pharmaceutical market and the size of the market itself. Conclusions: Our findings imply that the profit-seeking behaviour exhibited by medical providers is the engine of competitive forces in Taiwan's prescription drug market. This creates financial incentives for them, which in turn influences their choices of prescription drugs.
AB - Background: This study empirically estimates the magnitude and associated determinants of profit margins that medical providers earn from prescription drugs based on Taiwan's pharmaceutical market. Methods: Our main data set is from the population-based claims data compiled by the National Health Insurance Research Database covering three waves of price adjustment: July-December 2004, October 2007-September 2008 and October 2009-September 2010. Only drugs whose reimbursement prices were adjusted using the R-zone formula were used as samples for this study. By calculating the difference between retail and wholesale prices for 796 pharmaceutical products, we can estimate the profit margin determinants using the regression model. Results: We found evidence that suppliers of generic drugs tend to offer larger discounts to medical providers than suppliers of brand-name drugs. In addition, the countervailing power of wholesale pharmaceuticals, as measured by the discount rate offered by pharmaceutical manufacturers, is positively associated with the degree of competition within the pharmaceutical market and the size of the market itself. Conclusions: Our findings imply that the profit-seeking behaviour exhibited by medical providers is the engine of competitive forces in Taiwan's prescription drug market. This creates financial incentives for them, which in turn influences their choices of prescription drugs.
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U2 - 10.1093/INTHEALTH/IHZ072
DO - 10.1093/INTHEALTH/IHZ072
M3 - Article
C2 - 31647555
AN - SCOPUS:85087320516
SN - 1876-3413
VL - 12
SP - 272
EP - 280
JO - International Health
JF - International Health
IS - 4
ER -