Rents for Pills - How Financial Incentives Influence Physician Behavior

Müller, Tobias; Schmid, Christian; Gerfin, Michael (21 July 2020). Rents for Pills - How Financial Incentives Influence Physician Behavior (Unpublished)

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We analyze how a recent regime-change in self dispensing impacts the prescription decisions of physicians in two large Swiss cities. The regime-change introduced financial incentives into the prescription decisions, because physicians were now allowed to dispense drugs at their on-site pharmacy and earn a mark-up on each prescription. Using detailed physician-, patient- and product-level claims data from a large health insurer, we find that dispensing leads to significant increases in drug spending per patient by up to 15%. Our analysis is indicative that dispensing operates through two main channels: a) physicians increase the number of packages prescribed to patients which is compatible with a package size channel and b) physicians switch to more profitable brands implying a cherry-picking response. On the other hand, our findings suggest that the financial rewards inherent in dispensing do not alter the dosage-decisions of doctors nor do they result in practice style changes. Overall, our results show that dispensing induces physicians to engage in rent-seeking behavior resulting in avoidable costs for the health care system.

Item Type:

Working Paper


03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Müller, Tobias Benjamin and Gerfin, Michael


300 Social sciences, sociology & anthropology > 330 Economics




Dino Collalti

Date Deposited:

18 Jan 2021 14:09

Last Modified:

18 Jan 2021 14:09


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