The Impact of Pharmaceutical Policy Measures: A Structural-Break Approach
22 Pages Posted: 22 Mar 2009
Date Written: March 20, 2009
Pharmaceutical spending in many other countries has had a steep increase in the last decade. The Portuguese Government has adopted several measures to reduce pharmaceutical expenditure growth, ranging from increased co-payments to price decreases determined administratively. Promotion of generic consumption has also ranked high in political priorities.
We assess the overall impact of the several policy measures on total pharmaceutical spending, using monthly data over the period January 1995 - August 2008. Endogenous structural breaks (time-series) methods were employed.
Our findings suggest that, in general, policy measures aimed at controlling pharmaceutical expenditure have been unsuccessful. Two breaks were identified. Both coincide with administratively determined price decreases. Measures aimed at increasing competition in the market had no visible effect on the dynamics of Government spending in pharmaceutical products. In particular, the introduction of reference pricing had only a transitory effect of less than one year, with historical growth resuming quickly. The consequence of this ineffectiveness is a transfer of financial burden from the Government to the patients, with no apparent effect on the dynamics of pharmaceutical spending. This strongly suggests that pharmaceutical companies have been able to adjust to policy measures, in order to sustain their sales. It remains a challenge for the future to identify firms' strategies that supported continued growth of sales, despite the several policy measures adopted.
Keywords: Pharmaceutical expenditures, structural breaks
JEL Classification: I11,I18
Suggested Citation: Suggested Citation