OM MULIGHEDERNE FOR AT REDUCERE DE OFFENTLIGE UDGIFTER TIL LÆGEMIDLER GENNEM ØGET KONKURRENCE
On the possibility of reducing public expenditures on medicine through <p> deregulation. The market for medicine is special in three essential respects: (a) The <p> role of the buyer is divided by three agents: the (informed) doctor, who prescribes <p> the medicine, the public health insurance, which pays most of the bill, and the <p> (uninformed) consumer, who benefits from the medication and pays part of the bill. <p> This division creates obvious incentive problems. (b) The distributors (pharmacies <p> and wholesalers) have no market power as they are obliged to procure the medicine <p> prescribed by the doctors - no more no less. (c) Competition among suppliers is <p> limited; most medicine is provided by either a single producer of patented drugs or <p> by a few competitors. Economic efficiency calls for some combination of regulation <p> and competition, the exact combination depending upon the market structure of the <p> various sub-markets. - First, we discuss the possibilities of designing an appropriate <p> combination of administrative regulation and incentives suitable for enhancing cost-efficiency <p> of prescription. Second, we analyse the economies of deregulating the <p> pharmacy sector which, by now, is subject to both controls on both (total) gross <p> profits and establishment. The conclusion is that deregulation is unlikely to increase <p> economic efficiency. Third, we take a look at the whole sale sector which, by now, is <p> subject to binding re-sale prices determined by the producers. Economic efficiency <p> dictates that binding resale prices are upheld. Finally, we discuss the possibilities of <p> strengthening the demand side as a way of reducing expenditures and recommend <p> that the organization of the demand side should reflect the market structure of the <p> supply side: In case of monopoly, the bargaining should be entrusted to a single, <p> powerful public body. In case of imperfect competition, tendering appears appropriate.
