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Biomedical subjects

P M Danzon

Publications and source records attributed to P M Danzon.

At least 19 recordsLinked to original sources
PubMed2001

From hospital to drugstore: insurance and the shift to outpatient care.

As policymakers consider whether and how to add prescription drug coverage to Medicare, they need to understand the relationship between insurance coverage and the adoption of new medical technologies, including drugs. Even the direction of these relationships is not always so clear. In this Issue Brief, Drs. Danzon and Pauly examine the shift from inpatient to outpatient care in the last 20 years,and ask two broad questions: to what extent was this shift encouraged by changes in insurance, and to what extent was insurance coverage influenced by this shift?

Ambulatory Care↗
PubMed2000

Cross-national price differences for pharmaceuticals: how large, and why?

Bilateral drug price and quantity indexes, based on comprehensive data for seven countries (US, Canada, France, Germany, Italy, Japan and the UK), refute the conventional wisdom that US drug prices are much higher than elsewhere, for Laspeyres (US-weighted) indexes. Previous drug-price comparisons are biased by unrepresentative samples and unweighted indexes. Quasi-hedonic regression shows that cross-national price differences reflect differences in product characteristics and in their implicit prices, which reflect the regulatory regime. Strict price regulation systematically lowers prices for older molecules and globally diffused molecules. Generic competition lowers prices in less-regulated regimes, which also have more price-elastic demand.

Developed Countries↗
PubMed1998

The economics of parallel trade.

The potential for parallel trade in the European Union (EU) has grown with the accession of low price countries and the harmonisation of registration requirements. Parallel trade implies a conflict between the principle of autonomy of member states to set their own pharmaceutical prices, the principle of free trade and the industrial policy goal of promoting innovative research and development (R&D). Parallel trade in pharmaceuticals does not yield the normal efficiency gains from trade because countries achieve low pharmaceutical prices by aggressive regulation, not through superior efficiency. In fact, parallel trade reduces economic welfare by undermining price differentials between markets. Pharmaceutical R&D is a global joint cost of serving all consumers worldwide; it accounts for roughly 30% of total costs. Optimal (welfare maximising) pricing to cover joint costs (Ramsey pricing) requires setting different prices in different markets, based on inverse demand elasticities. By contrast, parallel trade and regulation based on international price comparisons tend to force price convergence across markets. In response, manufacturers attempt to set a uniform 'euro' price. The primary losers from 'euro' pricing will be consumers in low income countries who will face higher prices or loss of access to new drugs. In the long run, even higher income countries are likely to be worse off with uniform prices, because fewer drugs will be developed. One policy option to preserve price differentials is to exempt on-patent products from parallel trade. An alternative is confidential contracting between individual manufacturers and governments to provide country-specific ex post discounts from the single 'euro' wholesale price, similar to rebates used by managed care in the US. This would preserve differentials in transactions prices even if parallel trade forces convergence of wholesale prices.

Commerce↗
PubMed1998

International price comparisons for pharmaceuticals. Measurement and policy issues.

Cross-national price comparisons for pharmaceuticals are commonly used for two purposes. Comparisons based on a sample of products are used to draw conclusions about differences in average price levels. Cross-national comparisons applied to individual products are also used by governments to set domestic prices. This paper examines the major methodological issues raised by international price comparisons, focusing on measurement of differences in average price levels and the validity of policy conclusions drawn from such price comparison studies. It argues that valid measures of average price levels can only be obtained from comparisons based on a comprehensive or representative sample of products, appropriately weighted, following standard index number methods. Comparisons of individual product prices should take into account the manufacturer's entire product portfolio over time rather than focus narrowly on a single product at a point in time. Because of the great variation across countries in both the range of drug compounds available and the dosage forms, strengths and pack sizes for each compound, obtaining a broadly comprehensive or representative sample is problematical. If products are required to match on all dimensions, including molecule, manufacturer, strength and pack, as is common in most international price comparisons, then only a very small and unrepresentative sample of the drugs available in each country can be included in the analysis. A trade-off between the desire to compare only identical products and the need to compare a truly representative sample of a country's pharmaceutical market is therefore necessary. A valid comparison of average drug prices should include generics and over-the-counter products that are good substitutes for branded prescription drugs, with all forms, strengths and packs. To achieve this broad representation, however, the requirements of same manufacturer, same brand, dosage form, strength and pack size must be dropped. When such an approach is taken to the comparison of international drug prices, quite different results from those obtained from less comprehensive comparisons may be obtained. Indeed, a major conclusion of this analysis is that international drug price comparisons are extremely sensitive to choices made about certain key methodological issues, such as sample selection, unit of measurement for price and volume, the relative weight given to consumption patterns in the countries being compared, and the use of exchange rates or purchasing power parities for currency conversion. In particular, the results of this analysis indicate that recent reports suggesting that manufacturer prices in the US are 32% higher than in Canada and 60% higher than in the UK are in fact overstatements which arise from limitations of the sample and methods used to calculate these price differentials.

Dosage Forms↗
PubMed1995

Consolidation and restructuring: the next step in managed care.

Rising expenditures on health care in the U.S. have been facilitated by the fundamental problems of asymmetric information and insurance-induced moral hazard. If managed care is to succeed, it must take both into account through strategies such as information-based consumer education and provider risk-sharing. Because larger networks offer significant advantages in implementing such strategies, hospital mergers, physician-hospital alliances, and economies of scale are major trends in the evolution of managed care.

Community Networks↗
PubMed1985

Liability and liability insurance for medical malpractice.

Physicians typically carry virtually complete malpractice insurance coverage. This contradicts standard theoretical predictions that under a negligence rule of liability there should be no demand for insurance, and insurance policies under moral hazard will contain co-payment provisions. It is argued that judicial 'errors' in defining negligence generate a demand for liability and legal defense insurance. Physician co-payment undermines the insurer's incentives for legal defense and thus induces a trade-off between loss reduction by injury prevention and by legal defense. Fee-for-service reimbursement further distorts the physician's choice between injury prevention and insurance. Implications for the deterrent function of the tort system are discussed.

Actuarial Analysis↗
PubMed1984

Factors affecting laboratory test use and prices.

The use of clinical laboratory tests has more than doubled during the past decade. Some observers of the health system feel that this growth is excessive and is a result of current payment systems. This article examines the effects of current reimbursement policies with regard to the use of laboratory tests and prices charged for tests. The results suggest the following: The method of financing medical care, including cost sharing and prepaid group practice arrangements, affects the volume of laboratory testing through the number of patient contacts with the medical care system rather than through the number of tests used per patient contact. Fee ceilings on physician time appear to be partially offset by higher test prices. Cost-based reimbursement for hospital services is associated with higher charges in hospital laboratories.

Clinical Laboratory Techniques↗
PubMed1982

Hospital 'profits': the effects of reimbursement policies.

This paper provides a theoretical and empirical analysis of the effect of cost-based reimbursement (CBR) on hospital costs and charges. It takes issue with previous analyses which have treated CBR as paying economic costs plus a mark-up, and have concluded that the mark-up is too small to significantly distort hospital decision-making. The basic thesis here is that if reimbursement is based on costs, accounting costs become a price to cost-paying patients, and will be optimized to maximize revenue. A hospital serving both cost and charge-paying (private) patients can set two price schedules. Accounting profits (ratio of charges to costs) are not a measure of economic profit but of relative prices to these two groups of patients. In the absence of constraints from regulation or patient co-payment, the optimum level of accounting costs would be infinite. In practice, the Medicare reimbursement formula links allowable costs to charges received from charge-paying patients. This formula creates incentives for the hospital to raise charges above the single-price, profit-maximizing monopoly level. This inflationary effect of the Medicare formula does not presuppose that Medicare pays less than full cost. The empirical analysis of hospital laboratory costs and charges generally supports the predictions; for other departments, the conclusions are consistent but more tentative because of data limitations. Overall, evidence suggests minimal cross-subsidy between cost and charge-paying patients. Comparisons of cost and charge levels in for-profit, voluntary non-profit and government hospitals are presented, but it is emphasized that inferences about relative efficiency and profitability cannot be drawn from accounting data, given the incentives created by CBR.

Accounting↗
PubMedDate not supplied

Insurance and new technology: from hospital to drugstore.

This paper traces the relationship between insurance coverage and the technology-induced shift of the locus of medical care and medical spending from the inpatient to the outpatient setting. This shift was accompanied by an increase in the extent of private insurance coverage for outpatient treatments; technological change both caused the increase in coverage (for more costly treatments) and was affected by it (as lower user prices increased the demand for new types of care). Changes in insurance administration technology also facilitated the transformation. Some aspects of the change may have been inefficient, because of the presence of tax subsidy and legal requirements to cover costly new technologies of low effectiveness, but the transformation appears thus far to have worked better for private insurance than for Medicare.

Aged↗