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Book part
Publication date: 15 December 2010

Ian McCarthy

With expenditures totaling $227 billion in 2007, prescription drug purchases are a growing portion of the total medical expenditure, and as this industry continues to grow…

Abstract

With expenditures totaling $227 billion in 2007, prescription drug purchases are a growing portion of the total medical expenditure, and as this industry continues to grow, prescription drugs will continue to be a critical part of the larger health care industry. This chapter presents a survey on the economics of the US pharmaceutical industry, with a focus on the role of R&D and marketing, the determinants (and complications) of prescription drug pricing, and various aspects of consumer behavior specific to this industry, such as prescription drug regulation, the patient's interaction with the physician, and insurance coverage. This chapter also provides background in areas not often considered in the economics literature, such as the role of pharmacy benefit managers in prescription drug prices and the differentiation between alternative measures of prescription drug prices.

Book part
Publication date: 25 March 2010

Teresa Bernard Gibson, Catherine G. McLaughlin and Dean G. Smith

Purpose – The purpose of this study is to estimate the own- and cross-price elasticity of brand-name outpatient prescription drug cost-sharing for maintenance medications and to…

Abstract

Purpose – The purpose of this study is to estimate the own- and cross-price elasticity of brand-name outpatient prescription drug cost-sharing for maintenance medications and to estimate the effects of changes in the price differential between generic and brand-name prescription drugs.

Methodology/approach – We first review the literature on the effects of an increase in brand-name drug patient cost-sharing. In addition, we analyze two examples of utilization patterns in filling behavior associated with an increase in brand-name cost-sharing for patients in employer-sponsored health plans with chronic illness.

Findings – We found that the own-price elasticity of demand for brand-name prescription drugs was inelastic. However, the cross-price elasticity was not consistent in sign, and utilization patterns for generic prescription fills did not always increase after a rise in brand-name cost-sharing.

Research limitations – The empirical examples are limited to the experience of patients with employer-sponsored health insurance.

Practical implications – The common practice of increasing brand-name prescription drug patient cost-sharing to increase consumption of generic drugs may not always result in higher generic medication use. Higher brand-name drug cost-sharing levels may result in discontinuation of chronic therapies, instead of therapeutic switching.

Originality/value of chapter – The value of this chapter is its singular focus on the effects of higher brand-name drug cost-sharing through a synthesis of the literature examining the own- and cross-price elasticity of demand for brand-name medications and two empirical examples of the effects of changes in brand-name cost-sharing.

Details

Pharmaceutical Markets and Insurance Worldwide
Type: Book
ISBN: 978-1-84950-716-5

Open Access
Article
Publication date: 1 August 2021

John York, Kaley Lugo, Lukasz Jarosz and Michael Toscani

The purpose of this study is to understand how Amazon’s threat may impact the Pharmacy Industry as a whole and whether traditional drugstore chains such as consumer value stores…

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Abstract

Purpose

The purpose of this study is to understand how Amazon’s threat may impact the Pharmacy Industry as a whole and whether traditional drugstore chains such as consumer value stores (CVS) Pharmacy will need to re-think their business strategy, especially in the digital space, to account for potential disruption.

Design/methodology/approach

This is a hypothetical case study used as a teaching exercise to guide the learner through a decision-making process. The case starts by presenting a disruption in the retail pharmacy business that the main character must navigate by using real-world data and insights, provided in the case, to formulate a recommendation.

Findings

In an extremely competitive and consolidated pharmacy market, Amazon has the potential to change the business entirely. CVS Health will potentially face strong headwinds from Amazon’s PillPack and a downward trend in prescription sales. Regardless of the new competition, CVS Health continues to be innovative in the space. Instead of being a one-trick pony, CVS has encompassed the mentality of becoming a one-stop-shop by expanding into areas such as specialty pharmacy, health clinics, pharmacy benefits management and innovative digital capabilities.

Originality/value

This paper provides the reader with existing and known information about the evolving retail pharmacy business and allows the reader to interpret the new information to make their own decision on how a digital business strategy team can account for potential disruption.

Details

International Journal of Pharmaceutical and Healthcare Marketing, vol. 15 no. 3
Type: Research Article
ISSN: 1750-6123

Keywords

Article
Publication date: 1 February 2006

Alan D. Smith

With the number of prescriptions rising nationally each year, it is surprising that web‐based technology is not fully embraced in the pharmacy industry as an aid to…

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Abstract

Purpose

With the number of prescriptions rising nationally each year, it is surprising that web‐based technology is not fully embraced in the pharmacy industry as an aid to quality‐assuring prescribing processes. Traditional prescription handling is done in a manual fashion with physicians hand‐writing prescriptions for the patients during an office visit, giving the patient the responsibility of taking the prescription to a pharmacy or mailing the prescription to a mail order company for fulfillment. Electronic prescribing (e‐prescribing) has the ability not only to streamline the prescription writing process, but also to reduce the number of errors that may be incurred with hand‐written prescriptions. The purpose of this paper is to investigate these phenomena in the USA. Design/methodology/approach – A number of hypotheses were tested using principal‐components analysis (PCA) and factor analyses. As a result, a total of 55 fully employed, professional and semi‐professional service management and internet users, representing a college‐educated and knowledge‐based sample derived from the metropolitan section of Pittsburgh, was selected. Findings – The six major constructs generated from the factor loadings in descending order of importance were: profit and risk factors, shipping and handling, saving, customer relationship management (CRM) and ethics, age, and awareness. The dependent variable chosen to be regressed against these major independent factor‐based constructs was willingness to purchase prescriptions online. The overall relationship was found to be statistically significant (F=2.971, p=0.015) in predicting willingness to use e‐prescribing options based on the various independent constructs. However, when testing the various standardized beta coefficients in the linear model, only the factor score‐based construct CRM and ethics was found to significantly contribute to predicting the willingness to purchase prescriptions online (t=−3.074, p=0.003). Research limitations/implications – Although this study appears to represent the e‐prescribing process in the USA, the sample size and region studied are only one slice of the general population. Practical implications – Unfortunately, the adoption of e‐prescribing has been difficult to attain owing to numerous barriers throughout the industry. Such acceptance barriers include lack of technology trust, associated system costs, and risk of un‐securing patient health and medical information. Originality/value – This article documents that increasing numbers of pharmacies today are building their IT‐infrastructures to accept electronic prescriptions and it may soon be the preferred method for physicians to write prescriptions. It is with great anticipation that this technology will also enhance the prescription‐writing abilities of prescribing physicians globally, giving them electronic access to patient medical records and resources that will assist them in prescribing the correct drug for the patient.

Details

International Journal of Health Care Quality Assurance, vol. 19 no. 2
Type: Research Article
ISSN: 0952-6862

Keywords

Article
Publication date: 3 July 2007

Daniel Simonet

This paper aims to review the vertical or quasi‐vertical integration that characterized the pharmaceutical industry in the mid‐1990s. The acquisitions and vertical partnerships…

1197

Abstract

Purpose

This paper aims to review the vertical or quasi‐vertical integration that characterized the pharmaceutical industry in the mid‐1990s. The acquisitions and vertical partnerships that linked pharmacy benefits managers and drug manufacturers modified the structure of the market at that time. What were the motivations of those agreements? Did they induce any distortion on competition in the drug market? And why did they fail to achieve their desired strategic advantages?

Design/methodology/approach

The paper uses established theoretical perspectives, such as the resource‐based view and the theory of contestable markets, as the basis for a descriptive analysis, documenting strategic decisions of vertical integration using supporting literature in marketing and strategy.

Findings

Vertical integration did not obtain the intended results (e.g. acquisition of competitive advantages). This perspective provides a framework to examine vertical integration strategies, applicable to other industries.

Originality/value

The paper reviews the objectives of vertical integration strategies of US drug firms in the 1990s and their hidden agendas.

Details

International Journal of Pharmaceutical and Healthcare Marketing, vol. 1 no. 2
Type: Research Article
ISSN: 1750-6123

Keywords

Book part
Publication date: 25 March 2010

Yang Xie, John M. Brooks, Julie M. Urmie and William R. Doucette

Objective – To examine whether local area pharmacy market structure influences contract terms between prescription drug plans (PDPs) and pharmacies under Part D.Data – Data were…

Abstract

Objective – To examine whether local area pharmacy market structure influences contract terms between prescription drug plans (PDPs) and pharmacies under Part D.

Data – Data were collected and compiled from four sources: a national mail survey to independent pharmacies, National Council for Prescription Drug Programs (NCPDP) Pharmacy database, 2000 U.S. Census data, and 2006 Economic Census data.

Results – Reimbursements varied substantially across pharmacies. Reimbursement for 20mg Lipitor (30 tablets) ranged from $62.40 to $154.80, and for 10mg Lisinopril (30 tablets), it ranged from $1.05 to $18. For brand-name drug Lipitor, local area pharmacy ownership concentration had a consistent positive effect on pharmacy bargaining power across model specifications (estimates between 0.084 and 0.097), while local area per capita income had a consistent negative effect on pharmacy bargaining power across specifications(−0.149 to −0.153). Few statistically significant relationships were found for generic drug Lisinopril.

Conclusion – Significant variation exists in PDP reimbursement and pharmacy bargaining power with PDPs. Pharmacy bargaining power is negatively related to the competition level and the income level in the area. These relationships are stronger for brand name than for generics. As contract offers tend to be non-negotiable, variation in reimbursements and pharmacy bargaining power reflect differences in initial insurer contract offerings. Such observations fit Rubinstein's subgame perfect equilibrium model.

Implication – Our results suggest pharmacies at the most risk of closing due to low reimbursements are in areas with many competing pharmacies. This implies that closures related to Part D changes will have limited effect on Medicare beneficiaries’ access to pharmacies.

Details

Pharmaceutical Markets and Insurance Worldwide
Type: Book
ISBN: 978-1-84950-716-5

Book part
Publication date: 25 March 2010

William E. Encinosa, Didem Bernard and Avi Dor

Purpose – To estimate the impact of diabetic drug adherence on hospitalizations, emergency room (ER) visits, and hospital costs.Methods – It is often difficult to measure the…

Abstract

Purpose – To estimate the impact of diabetic drug adherence on hospitalizations, emergency room (ER) visits, and hospital costs.

Methods – It is often difficult to measure the impact of drug adherence on hospitalizations since both adherence and hospitalizations may be correlated with unobservable patient severity. We control for such unobservables using propensity score methods and instrumental variables for adherence such as drug coinsurance levels and direct-to-consumer advertising.

Findings – We find a significant bias due to unobservable severity in that patients with more severe health are more apt to comply with medications. Thus, the relationship between adherence and hospitalization will be underestimated if one does not control for unobservable severity. Overall, we find that increasing diabetic drug adherence from 50% to 100% reduces the hospitalization rate by 23.3% from 15% to 11.5%. ER visits reduce by 46.2% from 17.3% to 9.3%. Although such an increase in adherence increases diabetic drug spending by $776 a year per diabetic, the cost savings for averted hospitalizations and ER visits are $886 per diabetic, a cost offset of $1.14 per $1.00 spent on diabetic drugs.

Originality – Most of the drug cost-offset literature focuses only on the impact of cost-sharing and drug spending on cost-offsets, making it impossible to back-out the empirical impact of actual drug adherence on cost-offsets. In this chapter, we estimate the direct impact of adherence on hospitalizations and costs.

Details

Pharmaceutical Markets and Insurance Worldwide
Type: Book
ISBN: 978-1-84950-716-5

Book part
Publication date: 30 December 2004

Maurice Penner, Susan J. Penner and William Keck

Pharmaceuticals are essential for the management of many chronic conditions. As a result, it is important to examine how the administration of pharmaceutical benefits affects…

Abstract

Pharmaceuticals are essential for the management of many chronic conditions. As a result, it is important to examine how the administration of pharmaceutical benefits affects physicians and pharmacists providing chronic care services. In the 1990s, HMOs and PPOs began to more aggressively manage outpatient pharmaceutical benefits, leading to the growth of pharmaceutical benefit management companies (PBMs).

In this exploratory study, 10 primary care physicians and 12 pharmacists in the San Francisco area were interviewed in 1999, and 11 more pharmacists in 2004, on how they worked with PBMs and their controls on prescribing and dispensing. Responses indicated major problems for both health professionals in negotiating with the PBM as a third party payor, in coping with switches and multiple formularies, and in added work for the health care professional. Increased risk to chronically ill patients for poorer outcomes is an important related problem with PBMs.

The Medicare drug benefit law passed in 2003 will likely result in similar problems for many beneficiaries, including those with chronic care needs. The paper proposes some policy solutions to reduce PBM problems for physicians, pharmacists and the Medicare population.

Details

Chronic Care, Health Care Systems and Services Integration
Type: Book
ISBN: 978-1-84950-300-6

Article
Publication date: 3 April 2017

Ilwoo Ju

The purpose of the study was to examine the effects of prescription drug advertising health risk disclosure prominence and the mediating role of introspective message attention.

Abstract

Purpose

The purpose of the study was to examine the effects of prescription drug advertising health risk disclosure prominence and the mediating role of introspective message attention.

Design/methodology/approach

An experiment was conducted to test varying levels of health risk disclosure prominence in prescription drug advertising (high vs low).

Findings

The results showed that a more prominent health risk disclosure than a less prominent one enhanced introspective message attention, risk knowledge and risk perception of the drug’s side effects. In addition, the introspective attention mediated the health risk disclosure effects on risk knowledge and risk perception.

Research limitations/implications

The artificial experimental setting should be considered. In addition, various therapeutic categories and health risk disclosure formats need to be examined.

Practical implications

To ensure fair balance in prescription drug advertising, message designers should present a sufficient level of health risk disclosure prominence.

Social implications

To encourage consumers to make informed prescription drug decisions, health risk information provided through prescription drug advertising may be important. Health-marketing promotional messages should address fair balance by considering health risk disclosure prominence.

Originality/value

Although the FDA has issued its risk communication guidance draft for pharmaceutical manufacturers to ensure fair balance between benefit and risk information in pharmaceutical promotion, little empirical research has been conducted to test the health risk disclosure prominence effects on consumers’ health-related perception about the drug. This study fills the gap in the literature.

Details

International Journal of Pharmaceutical and Healthcare Marketing, vol. 11 no. 1
Type: Research Article
ISSN: 1750-6123

Keywords

Article
Publication date: 11 May 2015

David Zimmer

The US Medicare Modernization Act of 2003 introduced optional prescription drug coverage, beginning in 2006, widely known as Medicare Part D. This paper uses up-to-date nationally…

Abstract

Purpose

The US Medicare Modernization Act of 2003 introduced optional prescription drug coverage, beginning in 2006, widely known as Medicare Part D. This paper uses up-to-date nationally representative survey data to investigate the impact of Part D not only on drug spending and consumption, but also on the composition of drug consumption. The paper aims to discuss these issues.

Design/methodology/approach

Specifically, the paper investigates whether Part D impacted the number of therapeutic classes for which drugs were prescribed, and also whether Part D lead to increased usage of drugs for specific medical conditions that typically receive drug-intensive therapies.

Findings

In addition to confirming findings from previous studies, this paper shows that Part D increased the number of therapeutic classes to which seniors receive drugs by approximately four classes. Part D also lead to increased usage of drugs used to treat upper respiratory disease, hypertension, and diabetes.

Originality/value

While mostly concurring with previous studies on the spending impacts of Part D, this paper is the first to shed light on other impacts of Part D, specifically with respect to its impact on therapeutic classes for which drugs are prescribed.

Details

Journal of Economic Studies, vol. 42 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

1 – 10 of 104