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Experts' agency problems: evidence from the prescription drug market in Japan
Author(s) -
Iizuka Toshiaki
Publication year - 2007
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.0741-6261.2007.00115.x
Subject(s) - medical prescription , markup language , context (archaeology) , agency (philosophy) , incentive , business , drug , empirical evidence , marketing , family medicine , medicine , pharmacology , economics , computer science , world wide web , sociology , microeconomics , epistemology , xml , social science , paleontology , philosophy , biology
This article examines the physician‐patient agency relationship in the context of the prescription drug market in Japan. In this market, physicians often both prescribe and dispense drugs and can pocket profits in so doing. A concern is that, due to the incentive created by the markup, physicians' prescription decisions may be distorted. Empirical results using anti‐hypertensive drugs suggest that physicians' prescription choices are influenced by the markup. However, physicians are also sensitive to the patient's out‐of‐pocket costs. Overall, although the markup affects prescription choices, physicians appear more responsive to the patient's out‐of‐pocket costs than their own profits from markup.