Lecture series of the Institute for Economic and Social Research (No.70)

Topic: Generic Pharmaceutical Adoption with Mismeasured Physician Agency

Date: November 3, 2017 

Time: 3:00 - 4:15 p.m. 

Venue: Room 106B, Zhonghui Building 

Speaker: Tang Meng-chi

Sponsor: Institute for Economic and Social Research

ABOUT TANG MENG-CHI

Meng-Chi received his Ph.D. from the Department of Economics, Michigan State University. He is currently an associate professor at the Department of Economics, National Chung Cheng University in Taiwan. His main research field is empirical IO, with focus on medical-care industry and contract theory. He also has some applied micro works in international trade, health, and family economics. Meng-Chi's current research focuses on physician agency problem in the pharmaceutical market in Taiwan, also known as the drug price black hole problem.

ABSTRACT

The markup from each prescription drug may affect physicians' generic pharmaceutical adoption choices, but data on this markup was rarely available. In this paper, we acquired the information on the average markup of 119 oral hypoglycemic drugs reported by the medical providers in Taiwan. While we did not observe the true markup of each provider, the difference between individual markup and average markup was accounted for as measurement error in our empirical model. We found that an increase of the markup differential between generic and branded drugs would increase about 10% likelihood of physicians' generic pharmaceutical adoptions. Our inferred distribution of the true markup differential shows that private clinics are likely to have the most markup differential from prescribing generic drugs instead of branded ones, followed by public clinics, private hospitals, and public hospitals in Taiwan.