S 9d drug policy

Government Pharmaceutical Subsidy Policy and the Demand for Health Care in Russia: 

Government Pharmaceutical Subsidy Policy and the Demand for Health Care in Russia Cheryl Cashin November 1, 2002

Motivation for the Research: 

Motivation for the Research Governments adopt policies to increase utilization of primary care and reduce expensive hospitalization; Outpatient care that substitutes for hospitalization depends on access to effective outpatient drug therapy; Governments subsidize drugs provided in hospitals more than drugs provided in an outpatient setting.

Research Questions: 

Research Questions What is the effect of government drug financing policy on the demand for other health care services? Do higher out-of-pocket prices for outpatient drugs affect demand for outpatient care? Do higher out-of-pocket prices for outpatient drugs affect demand for inpatient care?

Data: 

Data Russia Longitudinal Monitoring Survey (1995 and 1996 rounds) Nationally representative survey of 3,750 households (10,465 individuals) General purpose survey with health module: health status, health care utilization, drugs prescribed, drugs purchased, out-of-pocket health expenditures

Methods: 

Methods Estimation of “drug prices” individual drug expenditure = cluster average drug expenditure + individual variations Estimation of demand for outpatient care probability of outpatient care = f(drug prices, exemption status, chronic illness, income, other variables) Estimation of demand for inpatient care probability of inpatient care = f(drug prices last year, drug prices this year, exemption status, chronic illness, income, other variables)

Results:Drug Expenditures: 

Results: Drug Expenditures Entitlement to free or subsidized drugs reduces drug expenditures but not significantly Individuals diagnosed with cardiovascular disease spend 60% more on drugs than the average Individuals diagnosed with diabetes spend 30% more on drugs than the average.

Results:Demand for Outpatient Care: 

Results: Demand for Outpatient Care Higher drug prices reduce both the probability of reporting and illness and seeking outpatient care once an illness is reported. (10 increase in drug prices  between 0.7% and 1.5% decrease in demand for outpatient care) The effect is larger for low-income groups and for males. The effect is largest for low-income males without health insurance.

Results:Demand for Hospital Care: 

Results: Demand for Hospital Care Higher drug prices in 1996 have no effect on hospitalization in 1996. Higher drug prices in 1995 increase the demand for hospitalization in 1996. (10 increase in 1995 drug prices  between .4% and 1% increase in demand for hospital care)

Conclusions: 

Conclusions Higher drug prices reduce illness reporting and seeking immediate outpatient treatment. The effect is greatest for adult males with chronic illnesses, from low income groups, and without health insurance. Delayed outpatient treatment caused by higher drug prices leads to a higher probability of hospitalization in the future. Appropriate placement of drug subsidies may be important for encouraging early treatment, particularly for chronic conditions, and reducing hospitalization in the future.