Hostname: page-component-7c8c6479df-ph5wq Total loading time: 0 Render date: 2024-03-27T02:30:00.528Z Has data issue: false hasContentIssue false

Prescribing institutions: Explaining the evolution of physician dispensing

Published online by Cambridge University Press:  02 December 2011

KAREN EGGLESTON*
Affiliation:
Stanford University, Stanford, CA, USA

Abstract:

Health systems provide a rich field for testing hypotheses of institutional economics. The incentive structure of current healthcare delivery systems have deep historical and cultural roots, yet must cope with rapid technological change as well as market and government failures. This paper applies the economic approach of comparative and historical institutional analysis (Aoki, 2001; Greif, 2006) to health care systems by conceptualizing physician control over dispensing revenues as a social institution. The theory developed – emphasizing the interplay between cultural beliefs, interest groups, technological change, insurance expansion and government financing – offers a plausible explanation of reforms since the 1960s separating prescribing from dispensing in societies such as Japan, South Korea, Taiwan and China. Technological change and adoption of universal coverage trigger reforms by greatly increasing the social opportunity costs of physician over-prescribing and reshaping the political economy of forces impinging on the doctor–patient relationship.

Type
Research Article
Copyright
Copyright © The JOIE Foundation 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abbott, A. (1988), The System of Professions: An Essay on the Division of Expert Labor, Chicago: University of Chicago Press.CrossRefGoogle Scholar
Acemoglu, D., Johnson, S., and Robinson, J. A. (2001), ‘The Colonial Origins of Comparative Development: An Empirical Investigation’, American Economic Review, 91 (5): 13691401.CrossRefGoogle Scholar
Afendulis, C. C. and Kessler, D. P. (2007), ‘Tradeoffs from Integrating Diagnosis and Treatment in Markets for Health Care’, American Economic Review, 97 (3): 10131020.CrossRefGoogle ScholarPubMed
Anderson, S. (2005), Making Medicines: A Brief History of Pharmacy and Pharmaceuticals, London: Pharmaceutical Press.Google Scholar
Aoki, M. (2001), Toward a Comparative Institutional Analysis, Cambridge, MA: MIT Press.CrossRefGoogle Scholar
Arrow, K. J. (1963), ‘Uncertainty and the Welfare Economics of Medical Care’, American Economic Review, 53 (5): 941973.Google Scholar
Baker, G., Gibbons, R., and Murphy, K. J. (2002), ‘Relational Contracts and the Theory of the Firm’, Quarterly Journal of Economics, 117 (1): 3984.CrossRefGoogle Scholar
Bisin, A. and Verdier, T. (2010), ‘The Economics of Cultural Transmission and Socialization’, National Bureau of Economic Research Working Paper No. 16512, November 2010.Google Scholar
Campbell, J. C. and Ikegami, N. (1998), The Art of Balance in Health Policy: Maintaining Japan's Low-Cost, Egalitarian System, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Cavalli-Sforza, L. L. and Feldman, M. (1981), Cultural Transmission and Evolution: A Quantitative Approach, Princeton, NJ: Princeton University Press.Google ScholarPubMed
Chen, B. K., Gertler, P. J., and Yang, C. Y. (2011), ‘Physician Ownership of Non-Physician Medical Services’, Working Paper, 21 February 2011 [unpublished manuscript].Google Scholar
Chou, Y. J., Yip, W. C., Lee, C. H., Huang, N., Sun, Y. P., and Chang, H. J. (2003), ‘Impact of Separating Drug Prescribing and Dispensing on Provider Behavior: Taiwan's Experience’, Health Policy and Planning, 18 (3): 316329.CrossRefGoogle ScholarPubMed
Cochran, S. (2006), Chinese Medicine Men: Consumer Culture in China and Southeast Asia, Cambridge, MA: Harvard University Press.Google Scholar
Culyer, A. J. (1995), ‘Need: The Idea Won't Do – But We Still Need It’, Social Science and Medicine, 40 (6): 727730.CrossRefGoogle Scholar
Currie, J., Lin, W., and Zhang, W. (2010), ‘Patient Knowledge and Antibiotic Abuse: Evidence From an Audit Study in China’, Journal of Health Economics, 30 (5): 933949.CrossRefGoogle Scholar
Darby, M. R. and Karni, E. (1973), ‘Free Competition and the Optimal Amount of Fraud’, Journal of Law and Economics, 16 (1): 6788.CrossRefGoogle Scholar
Davis, J. B. (ed.) (2001), The Social Economics of Health Care, London and New York: Routledge.CrossRefGoogle Scholar
Eggleston, K. N. (ed.) (2009), Prescribing Cultures and Pharmaceutical Policy in the Asia Pacific, Stanford, CA: Walter H. Shorenstein Asia-Pacific Research Center, distributed by Brookings Institution Press.Google Scholar
Eggleston, K. N. (2010), ‘“Kan bing nan, kan bing gui”: Challenges for China's Healthcare System Thirty Years into Reform’, in Oi, J. C., Rozelle, S., and Zhou, X. (eds.), Growing Pains: Tensions and Opportunities in China's Transformation, Stanford, CA: Walter H. Shorenstein Asia-Pacific Research Center, distributed by Brookings Institution Press, pp. 229272.Google Scholar
Eggleston, K. N. (2011), ‘Prescribing Institutions: Explaining the Evolution of Physician Dispensing’, Asia Health Policy Program Working Paper No. 24, 18 October 2011, Stanford, CA: Stanford University, http://iis-db.stanford.edu/pubs/23374/AHPPwp_24.pdf (accessed November 2011).Google Scholar
Eggleston, K. N. and Yang, B. (2009), ‘Physician and Pharmacists in Comparative Historical Perspective: The Case of South Korea’, in Eggleston, K. (ed.), Prescribing Cultures and Pharmaceutical Policy in the Asia Pacific, Stanford, CA: Walter H. Shorenstein Asia-Pacific Research Center, distributed by Brookings Institution Press, pp. 267280.Google Scholar
Fairbank, J. K. and Goldman, M. (2006), China: A New History, Cambridge, MA: Harvard University Press.Google Scholar
Fujii, M. and Reich, M. (1988), ‘Rising Medical Costs and the Reform of Japan's Health Insurance System’, Health Policy, 9 (1): 924.CrossRefGoogle Scholar
Glaeser, E. L. and Shleifer, A. (2003), ‘The Rise of the Regulatory State’, Journal of Economic Literature, 41 (2): 401425.CrossRefGoogle Scholar
Gorodnichenko, Y. and Roland, G. (2010), ‘Culture, Institutions and the Wealth of Nations’, National Bureau of Economic Research Working Paper No. 16368, September 2010.Google Scholar
Greif, A. (2006), Institutions and the Path to the Modern Economy: Lessons from Medieval Trade, Political Economy of Institutions and Decisions Series, Cambridge and New York: Cambridge University Press.CrossRefGoogle Scholar
Hodgson, G. M. (2008), ‘An Institutional and Evolutionary Perspective on Health Economics’, Cambridge Journal of Economics, 32 (2): 235256.CrossRefGoogle Scholar
Hsieh, C. R. (2009), ‘Pharmaceutical Policy in Taiwan’, in Eggleston, K. (ed.), Prescribing Cultures and Pharmaceutical Policy in the Asia Pacific, Stanford, CA: Walter H. Shorenstein Asia-Pacific Research Center, distributed by Brookings Institution Press, pp. 109128.Google Scholar
Hubbard, T. N. (2002), ‘How Do Consumers Motivate Experts? Reputational Incentives in an Auto Repair Market’, Journal of Law and Economics, 45 (2): 437468.CrossRefGoogle Scholar
Hunt, J. A. (2005), ‘Pharmacy in the Modern World, 1841 to 1986 AD’, in Anderson, S. (ed.), Making Medicines: A Brief History of Pharmacy and Pharmaceuticals, London: Pharmaceutical Press, pp. 7793.Google Scholar
Iizuka, T. (2007), ‘Experts’ Agency Problems: Evidence from the Prescription Drug Market in Japan’, RAND Journal of Economics, 38 (3): 844862.CrossRefGoogle ScholarPubMed
Iizuka, T. (2009), ‘The Economics of Pharmaceutical Pricing and Physician Prescribing in Japan’, in Eggleston, K. (ed.), Prescribing Cultures and Pharmaceutical Policy in the Asia Pacific, Stanford, CA: Walter H. Shorenstein Asia-Pacific Research Center, distributed by Brookings Institution Press, pp. 4760.Google Scholar
Jacobson, M., Earle, C. C., Price, M., and Newhouse, J. P. (2010), ‘How Medicare's Payment Cuts for Cancer Chemotherapy Drugs Changed Patterns of Treatment’, Health Affairs, 29 (7): 13911399.CrossRefGoogle ScholarPubMed
Kim, H. J. and Prah Ruger, J. (2008), ‘Pharmaceutical Reform in South Korea and the Lessons it Provides’, Health Affairs, 27 (4): w260w269.CrossRefGoogle ScholarPubMed
Kleiner, M. M. and Park, K. W. (2010), ‘Battles Among Licensed Occupations: Analyzing Government Regulations on Labor Market Outcomes for Dentists And Hygienists’, National Bureau of Economic Research Working Paper No. 16560, November 2010.Google Scholar
Kornai, J. and Eggleston, K. N. (2001), Welfare, Choice and Solidarity in Transition: Reforming the Health Sector in Eastern Europe, Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Kwon, S. and Reich, M. R. (2005), ‘The Changing Process and Politics of Health Policy in Korea’, Journal of Health Politics, Policy and Law, 30 (6): 10031025.CrossRefGoogle ScholarPubMed
Liu, K. C. (1988), ‘Chinese Merchant Guilds: An Historical Inquiry’, Pacific Historical Review, 57 (1): 123.CrossRefGoogle Scholar
Liu, Y. M., Yang, Y. K., and Hsieh, C. H. (2009), ‘Financial Incentives and Physicians’ Prescription Decisions on the Choice Between Brand-Name and Generic Drugs: Evidence from Taiwan’, Journal of Health Economics, 28 (2): 341349.CrossRefGoogle ScholarPubMed
McGuire, T. G. (2000), ‘Physician Agency’, in Culyer, A. J. and Newhouse, J. P. (eds.), Handbook of Health Economics, vol. 1, part A, Amsterdam: Elsevier Science, pp. 461536.Google Scholar
McMaster, R. (2003), ‘A Socio-Institutionalist Critique of the 1990s Reforms of the United Kingdom's National Health Service’, Review of Social Economy, 60 (3): 403433.CrossRefGoogle Scholar
North, D. C. (2005), Understanding the Process of Economic Change, Princeton: Princeton University Press.CrossRefGoogle Scholar
Posner, R. A. (2010), ‘From the New Institutional Economics to Organization Economics: With Applications to Corporate Governance, Government Agencies, and Legal Institutions’, Journal of Institutional Economics, 6 (1): 137.CrossRefGoogle Scholar
Rischatsch, M. and Trottmann, M. (2009), ‘Physician Dispensing and the Choice Between Generic and Brand-Name Drugs – Do Margins Affect Choice?’, University of Zurich Socioeconomic Institute Working Paper No. 0911, July 2009.Google Scholar
Rodwin, M. A. and Okamoto, E. (2000), ‘Physicians’ Conflicts of Interest in Japan and the United States: Lessons for the United States’, Journal of Health Politics, Policy and Law, 25 (3): 343376.CrossRefGoogle ScholarPubMed
Savage, D. A. (1994), ‘The Professions in Theory and History: The Case of Pharmacy’, Business and Economic History, 23 (2): 129160.Google Scholar
Shiue, C. H. and Keller, W. (2007), ‘Markets in China and Europe on the Eve of the Industrial Revolution’, American Economic Review, 97 (4): 11891216.CrossRefGoogle Scholar
Sonnedecker, G. (1986), Kremers and Urdang's History of Pharmacy, Philadelphia: American Institute of the History of Pharmacy.Google Scholar
Standing Conference of the State Council of China (2009), Standing Committee of the State Council of China Adopted Guidelines for Furthering the Reform of Health-Care System in Principle, http://www.moh.gov.cn/publicfiles/business/htmlfiles/mohbgt/s3582/200901/38889.html (accessed 20 August 2009 [URL no longer available]).Google Scholar
Sun, Q., Santoro, M. A., Meng, Q., Liu, C., and Eggleston, K. N. (2008), ‘Pharmaceutical Policy in China’, Health Affairs, 27 (4): 10421050.CrossRefGoogle ScholarPubMed
Taylor, C. R. (1995), ‘The Economics of Breakdowns, Checkups, and Cures’, Journal of Political Economy, 103 (1): 5374.CrossRefGoogle Scholar
Tomita, N. (2009), ‘The Political Economy of Incrementally Separating Prescription from Dispensation in Japan’, in Eggleston, K. (ed.), Prescribing Cultures and Pharmaceutical Policy in the Asia Pacific, Stanford, CA: Walter H. Shorenstein Asia-Pacific Research Center, distributed by Brookings Institution Press, pp. 6178.Google Scholar
Wolinsky, A. (1993), ‘Competition in a Market for Informed Experts’ Services’, RAND Journal of Economics, 24 (2): 380398.CrossRefGoogle Scholar
Worling, P. (2005), ‘Pharmacy in the Early Modern World, 1617 to 1841 AD’, in Anderson, S. (ed.), Making Medicines: A Brief History of Pharmacy and Pharmaceuticals, London: Pharmaceutical Press, pp. 5775.Google Scholar
Yoo, D. and Steckel, R. H. (2010), ‘Property Rights and Financial Development: The Legacy of Japanese Colonial Institutions’, National Bureau of Economic Research Working Paper No. 16551, November 2010.Google Scholar