Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 14: Does Physicians' Compensation Affect the Probability of their Vetoing Generic Substitution?

David Granlund ()
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David Granlund: Department of Economics, Postal: Umeå University, SE-901 87 Umeå, Sweden, and the Swedish Retail Institute (HUI), Regeringsgatan 60, SE-103 29 Stockholm, Sweden

Abstract: Physicians' decisions whether or not to veto generic substitution were analyzed using a sample of 350,000 pharmaceutical prescriptions. Point estimates show that - compared to county-empoyed physicians on salary - physicians working at private practices were 50-80% more likely to veto substitution. The results indicate that this difference is explained by the difference in direct cost associated with substitution, rather than by private physicians' possibly stronger incentives to please their patients. Also, the probability of a veto was found to increase as patients' copayments decreased. This might indicate moral hazard in insurance, though other exaplanations are plausible.

Keywords: doctors; salary; fee for service; moral hazard; prescriptions; drugs

JEL-codes: D86; I11; L33

23 pages, April 4, 2008

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