Research funding and price negotiation for new drugs.

This paper analyzes the negotiation process, which leads to basic research funding and price setting for new drugs in regulated health insurance markets. Its results bring answers to the following questions: Should basic research be privately funded, publicly funded, or produced by an independent lab? Under which conditions is public integration of basic research efficient? How do pharmaceutical prices respond to different organizations of basic research? We show that efficiency and prices are higher when basic research is integrated in the firm that commercializes the drug as compared with independent basic research. In both organizations, the higher the negotiation power of the research labs relative to the one of the public health authority is, the higher the prices and the efficiency are. We thereby confirm the traditional trade-off between price containment and dynamic efficiency. We identify one important exception to this trade-off. Indeed, public integration of basic research can result in lowest prices and highest efficiency, as compared with the other possible organizations, in particular when basic and applied research are highly complementary.

Incentives to patients versus incentives to health care providers: The users' perspective.

In theory, health care providers may adapt their professional behavior to the financial incentives resulting from their remuneration. Our research question is whether the users of health care services anticipate such behavior from their general practitioner (GP) and, if they do, what consequences such anticipation has on their preferences regarding financial incentives. Our theoretical model explains users' preferences for one or another incentives scheme, disentangling the financial motives (incentives amounts, wealth) from the behavioral ones (perceived GPs' sensitivity to incentives). We empirically test our theoretical predictions using data from a survey that elicits individual preferences for either patient or provider hypothetical incentives in France. The empirical results confirm the theoretical ones: users tend to prefer incentives to patients rather than to GPs when the amount of GP incentives is high, when the amount of patient incentives is low, when they anticipate that their GP's medical decisions are affected by financial incentives or when their wealth is high. Otherwise, they prefer their GP to face financial incentives.

Physicians' balance billing, supplemental insurance and access to health care.

Some countries allow physicians to balance bill patients, that is, to bill a fee above the one that is negotiated with, and reimbursed by the health authorities. Balance billing is known for restricting access to physicians' services while supplemental insurance against balance billing amounts is supposed to alleviate the access problem. This paper analyzes in a theoretical setting the consequences of balance billing on the fees setting and on the inequality of access among the users of physicians' services. It also shows that supplemental insurance against the expenses associated with balance billing, rather than alleviating the access problem, increases it.

Drug Launch Timing and International Reference Pricing.

This paper analyzes the timing decisions of pharmaceutical firms to launch a new drug in countries involved in international reference pricing. We show three important features of launch timing when all countries refer to the prices in all other countries and in all previous periods of time. First, there is no withdrawal of drugs in any country and in any period. Second, whenever the drug is sold in a country, it is also sold in all countries with larger willingness to pay. Third, there is no strict incentive to delay the launch of a drug in any country. We then show that the first and third results continue to hold when the countries only refer to the prices of a subset of all countries in a transitive way and in any period. We also show that the second result continues to hold when the reference is on the last period prices only. Last, we show that the seller's profits increase as the sets of reference countries decrease with respect to inclusion.

Payment mechanism and GP self-selection: capitation versus fee for service.

This paper analyzes the consequences of allowing gatekeeping general practitioners (GPs) to select their payment mechanism. We model GPs' behavior under the most common payment schemes (capitation and fee for service) and when GPs can select one among them. Our analysis considers GP heterogeneity in terms of both ability and concern for their patients' health. We show that when the costs of wasteful referrals to costly specialized care are relatively high, fee for service payments are optimal to maximize the expected patients' health net of treatment costs. Conversely, when the losses associated with failed referrals of severely ill patients are relatively high, we show that either GPs' self-selection of a payment form or capitation is optimal. Last, we extend our analysis to endogenous effort and to competition among GPs. In both cases, we show that self-selection is never optimal.

Treatment and referral decisions under different physician payment mechanisms.

This paper analyzes and compares the incentive properties of some common payment mechanisms for GPs, namely fee for service (FFS), capitation and fundholding. It focuses on gatekeeping GPs and it specifically recognizes GPs heterogeneity in both ability and altruism. It also allows inappropriate care by GPs to lead to more serious illnesses. The results are as follows. Capitation is the payment mechanism that induces the most referrals to expensive specialty care. Fundholding may induce almost as much referrals as capitation when the expected costs of GPs care are high relative to those of specialty care. Although driven by financial incentives of different nature, the strategic behaviors associated with fundholding and FFS are very much alike. Finally, whether a regulator should use one or another payment mechanism for GPs will depend on (i) his priorities (either cost-containment or quality enhancement) which, in turn, depend on the expected cost difference between GPs care and specialty care, and (ii) the distribution of profiles (diagnostic ability and altruism levels) among GPs.

External referencing and pharmaceutical price negotiation.

External referencing (ER) imposes a price cap for pharmaceuticals, based on prices of identical or comparable products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm, whereas a home country (H) can either negotiate prices independently or implement ER, based on the foreign price. We show that country H prefers ER if copayments in H are relatively high. This preference is reinforced when H's population is small. Irrespective of relative country sizes, ER by country H harms country F. Our model is inspired by the wide European experience with this cost-containment policy. Namely, in Europe, drug authorization and price negotiations are carried out by separate agencies. We confirm our main results in two extensions. The first one allows for therapeutic competition between drugs. In the second one, drug authorization and price negotiation take place in a single agency.

Household health-seeking behaviour in Khartoum, Sudan: the willingness to pay for public health services if these services are of good quality.

In this paper, we analyse the extent of willingness to pay for good quality public health services in relation to the demographic and socio-economic characteristics of respondents. The analysis was carried out by way of a household survey conducted in Khartoum, Sudan in 2001. We studied willingness to pay by means of a contingent valuation method. A logistic regression model was used for the statistical analysis. The results show that the overall percentage of people who are willing to pay for good quality public health services is either 80% or 75% depending on whether respondents already pay for these services (group 1) or not (group 2). They show that although the two groups are willing to pay for good quality public health services, the demographic characteristics that affect the willingness to pay differ between the two groups. The results of the logistic regression analysis for each group are remarkably similar. We conclude that if the quality of services is improved, reasonable fees could be set. This supports the continuity of the policy to recover costs because virtually the majority of the households would be willing to pay reasonable fees.

Pricing and welfare implications of parallel imports in the pharmaceutical industry.

In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients' level of co-payment for buying pharmaceuticals, and patients differ in the utility obtained from the consumption of pharmaceuticals. We show that the effects of parallel imports on total welfare are as follows: On the one hand, when countries differ in their health system only, parallel imports decrease total welfare; On the other hand, when countries differ in the health needs of their patients only, parallel imports enhance total welfare.

GPs' payment contracts and their referral practice.

This paper compares the role of general practitioners in determining access to specialists in two types of health care systems: gate-keeping systems, where a general practitioner (GP) referral is compulsory to visit a specialist, and non-gate-keeping systems, where this referral is optional. We model the dependence between the GP's diagnosis effort and her referral behaviour, and identify the optimal contracts that induce the best behaviour from a public insurer's point of view, where there is asymmetry of information between the insurer and the GP regarding diagnosis effort and referral decisions. We show that gate keeping is superior wherever GP's incentives matter.