Financial incentives and prescribing behaviour in primary care

Olivia Bodnar; Hugh Stanley Emrys Gravelle; Nils Gutacker; Annika Herr

Financial incentives and prescribing behaviour in primary care

Olivia Bodnar, Hugh Stanley Emrys Gravelle, Nils Gutacker, Annika Herr

Centre for Health Economics

Research output: Working paper

Abstract

Many healthcare systems prohibit primary care physicians from dispensing the drugs they prescribe due
to concerns that this encourages excessive, ineffective or unnecessarily costly prescribing. Using data
from the English National Health Service for 2011 to 2018, we estimate the impact of physician dispensing
rights on prescribing behaviour at the extensive margin (comparing practices that dispense and those that
do not) and the intensive margin (comparing practices with different proportions of patients to whom they dispense). Our empirical strategy controls for practices selecting into dispensing based on observable (OLS, entropy balancing) and unobservable practice characteristics (2SLS). We show that physician dispensing raises drug costs per patient by 4.2%, which reflects more and more expensive drugs being prescribed, including potentially inappropriate substances such as opioids. Dispensing practices also prescribe smaller packages as reimbursement is partly based on a fixed fee per prescription dispensed. Similar effects are observed at the intensive margin.

Original language	English
Place of Publication	York, UK
Publisher	Centre for Health Economics, University of York
Number of pages	33
Publication status	Published - Apr 2021

Publication series

Name	CHE Research Paper
Publisher	Cenrte for Health Economics, University of York
No.	181

Keywords

Physician dispensing
primary care
drug expenditure
physician agency

Access to Document

CHE_RP181_physician_dispensingFinal published version, 1.2 MB

https://www.york.ac.uk/media/che/documents/papers/researchpapers/CHE_RP181_physician_dispensing.pdf

Cite this

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AB - Many healthcare systems prohibit primary care physicians from dispensing the drugs they prescribe dueto concerns that this encourages excessive, ineffective or unnecessarily costly prescribing. Using datafrom the English National Health Service for 2011 to 2018, we estimate the impact of physician dispensingrights on prescribing behaviour at the extensive margin (comparing practices that dispense and those thatdo not) and the intensive margin (comparing practices with different proportions of patients to whom they dispense). Our empirical strategy controls for practices selecting into dispensing based on observable (OLS, entropy balancing) and unobservable practice characteristics (2SLS). We show that physician dispensing raises drug costs per patient by 4.2%, which reflects more and more expensive drugs being prescribed, including potentially inappropriate substances such as opioids. Dispensing practices also prescribe smaller packages as reimbursement is partly based on a fixed fee per prescription dispensed. Similar effects are observed at the intensive margin.

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