The Public Financing of Pharmaceuticals

The Public Financing of Pharmaceuticals

An Economic Approach

Edited by Jaume Puig-Junoy

This book provides a complete approach to the economics of financing medicines and policy implications for the efficiency and equity of health systems. In all health systems with majority public financing, pharmaceutical reimbursement is one of the key factors in policies of change and transformation of health services in order to face the future with guarantees of financial sustainability.

Chapter 7: Insurance in public financing of pharmaceuticals

B. González López-Valcárcel

Subjects: economics and finance, health policy and economics, industrial economics, public finance

Extract

B. González López-Valcárcel INTRODUCTION This chapter focuses on the issue of co-payment, which occurs in insurance environments when insurer and insured share the payment of the price of the medicine. Using this as our central axis, we begin by addressing certain conceptual aspects, including the various forms, formulas and personal extension of co-payment, in the first section, and in the second section we go on to make a comparison between co-payment in insurance markets and in compulsory public insurance systems. In the third section we analyse expected effects from a microeconomic perspective, and we discuss to what extent the neoclassical microeconomic theory of demand is applicable to the case of pharmaceuticals. We explore the effects of co-payment on consumption and expenditure, and how it is shared between user and insurer, but also the possible effects on the health of individuals and populations. Equity considerations are inevitably raised in this analysis. The elements on which the analysis hinges in this section are: price and income elasticities of demand for pharmaceuticals; the role of the doctor as an inducer of demand; consumer sovereignty; discontinuities in demand functions; and other notable exceptions to the classical marginalist theory of demand. These exceptions require special microeconometric models and methods. The following section deals with international experiences with copayment, both from the regulatory viewpoint (comparative legislation) and on the basis of empirical evidence on elasticities and effects experienced in the wake of reforms that have been implemented or resulting from ‘quasi-natural’ experiments. In...

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