title: Financial incentives and physicians' prescription decisions on the choice between brand-name and generic drugs: evidence from Taiwan.
abstract: This paper tests the hypothesis of whether or not financial incentives affect a physician's prescription decision on the choice of generic versus brand-name drugs within a system in which physicians prescribe and dispense drugs. By using data obtained from Taiwan and focusing on diabetic patients, our empirical results provide several consistent findings in support of the hypothesis that profit incentives do affect the physician's prescribing decision, suggesting that physicians act as imperfect agents. An important implication of our findings is that rent seeking for profit margin between the reimbursement and the acquisition price instead of reducing costs is the major driving force behind generic substitution. As a result, the providers instead of the payers or consumers reap the financial benefits of generic substitution.
authors.affiliation: Department of Economics, College of Social Sciences, National Cheng-Kung University, 1 University Road, Tainan 70101, Taiwan. ymliu@mail.ncku.edu.tw
authors.forename: Ya-Ming
authors.initials: YM
authors.lastname: Liu
authors.forename: Yea-Huei Kao
authors.initials: YH
authors.lastname: Yang
authors.forename: Chee-Ruey
authors.initials: CR
authors.lastname: Hsieh
mesh_terms: D000368:Aged; D011307:Drug Prescriptions; D016568:Drugs, Generic / Q000627:therapeutic use; D055317:Evidence-Based Practice; D005260:Female; D006801:Humans; D008297:Male; D008875:Middle Aged; D017059:Models, Econometric; D010816:Physician Incentive Plans; D010818:Practice Patterns, Physicians'; D013624:Taiwan
chemical_list: D016568:Drugs, Generic