Exploring the effectiveness of demand-side retail pharmaceutical expenditure reforms

Abstract

Increasing expenditures on retail pharmaceuticals bring a critical challenge to the financial stability of healthcare systems worldwide. Policy makers have reacted by introducing a range of measures to control the growth of public pharmaceutical expenditure (PPE). Using panel data on European and non-European OECD member countries from 1990 to 2015, we evaluate the effectiveness of six types of demand-side expenditure control measures including physician-level behaviour measures, system-level price-control measures and substitution measures, alongside a proxy for cost-sharing and add a new dimension to the existing empirical evidence hitherto based on national-level and meta-studies. We use the weighted-average least squares regression framework adapted for estimation with panel-corrected standard errors. Our empirical analysis suggests that direct patient cost-sharing and some—but not all—demand-side measures successfully dampened PPE growth in the past. Cost-sharing schemes stand out as a powerful mechanism to curb PPE growth, but bear a high risk of adverse effects. Other demand-side measures are more limited in effect, though may be more equitable. Due to limitations inherent in the study approach and the data, the results are only explorative.