National Health Insurance and Generic Competition in the Pharmaceutical Market: Evidence from Taiwan

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• 研討會日期 : 2011-04-19
• 時間 : 14:30
• 主講人 : Professor Ya-Ming Liu
• 地點 : Conference Room B110
• 演講者簡介 : Ya-Ming Liu got her Ph.D. in Applied Economics from University of Minnesota at Twin Cities in 2003. She is currently serving as Acting Chairman and Associate Professor of Department of Economics at National Cheng Kung University. Her research field is in health economics and industrial organization.
• 演講摘要 : Competition between generic and brand-name drugs has long been recognized as an approach to save health care costs because prices of generic products are lower than those of brand-name drugs. Since the substitution of a generic drug for a branded drug is influenced by various institution factors and incentives faced by physicians, patients and pharmacies, it is important to understand how the alternative institutional factors affect the mechanism that guide the competition between generic and brand-name drugs. Previous studies emphasize that the force of generic competition is driven by a group of patients who are price-sensitive and hence there is a negative association between generic-to-brand price ratio and generic market share. In this paper, we hypothesize that the driving force to use the generic drugs to substitute for the brand-name drug is from the rent-seeking providers, i.e., who are seeking for financial interest from their prescription decisions. Under the provider-driven competition, we predict that there is a positive association between generic-to-brand price ratio and generic market share. To test our hypothesis, we identify a sample of 32 ingredient markets that the brand-name drugs went off patent between 1997 and 2007 in Taiwan. Our empirical results provide strong evidence in support of the hypothesis of provider-driven competition. Our findings highlight an important difference in the driving force of the generic competition between alternative health care systems. There are two important policy implications from our study. First, generic substitution is less effective in saving health care costs in a system where providers drive competition in the pharmaceutical market than in a system where patients drive competition. Second, medical providers instead of the payers or consumers reap the financial benefits of generic substitution under the system of provider-driven competition