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KMID : 0387319990090040065
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Korean Journal of Health Policy and Administration
1999 Volume.9 No. 4 p.65 ~ p.86
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The Welfare Effect of Mandatory Prescription in Korea
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Abstract
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In this study, we investigate the welfare effect of mandatory prescription(MP) in Korea. An immediate effect of MP is the increase in the implicit price of prescribed medicine, which could be obtained easily from drug stores before MP.
This will lower the quantity demanded, which will in turn reduce the abuse of drugs. The key to the cost-benefit analysis of MP, thereof MP, therefore, should be focused on this point ; price increase in the cost side and quantity decrease in the benefit side. Since we do not have as much information as needed for the analysis, however, we made strong assumptions for the clarity of numbers ; the severity of moral hazard of medical doctors related to the sales od hospital drugs, constant demand elasticity, constant benefit multiplier of reduced drug usage, and so on. With these rather strong assumptions, we find that I) the benefit side is much more sensitive to demand elasticity than the cost side effect ii) the larger the demand elasticity, the greater the size of net gain of MP, through the result depends on the size of the benefit multiplier. The analysis shows that we need to have information on the specific institutional path of health benefit diffusion caused by the reduction of drug usage , which was the major target of MP.
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KEYWORD
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mandatory prescription, consumer welfare, demand elasticity, medical benefit multiplier
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