A blurb on pharmacoeconomics

“To achieve a free market in healthcare and ensure competition, we will promote price transparency so that consumers will know the actual cost of treatments before they undergo them. When patients are aware of costs, they are less likely to over-utilize services.”excerpt from the 2012 Republican National Committee platform.

The foundation for my research interest lies with the above statement pulled directly from a major political party in the United States.  As the healthcare debate rages on, both Democrats and Republicans continue to use phrases like “free market” and “competition” in healthcare speeches to appeal to the capitalist heart of America.  However, my business education and experience teaches me that markets are much more complex than the choice between capitalism and socialism extremes portrayed in political debate.

In a 2010 article, I scratched the surface on the issue of demand elasticity in healthcare choices between sick and healthy patients.  For example, a sick patient admitted to a hospital is more likely to adhere to the expert recommendations of a physician regardless of the cost of those recommendations.  In this case, the demand is considered inelastic.  However, a relatively healthy patient receiving a physician recommendation in a community setting will be greatly influenced by the cost of adherence.  In other words, a small price increase in the patient’s copayment or out-of-pocket cost will result in a greater likelihood that the patient will not follow the physician’s recommendation.  This simple demand elasticity phenomenon has a great impact on healthcare decisions in the United States and contradicts many simplified assumptions made by political leaders.

I want my research to cast an economic light on areas of pharmacy that are being missed by many practitioners and patients.  For example, why do insurance companies vertically integrate and strategically build mail order pharmacies?  How do brand name medications become “cheaper” for the consumer than a commercially available generic of the same drug?  If your physician prescribed a medication, why does the physician have to take additional steps beyond writing the prescription to get the insurance company to pay for the medication?  Each of these questions has a great impact on the delivery of healthcare in the United States and I believe the answers are rooted in economics.

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Joey Mattingly, PharmD, MBA is an assistant professor at the University of Maryland School of Pharmacy located in Baltimore, Maryland. Joey has managed retail and long-term care pharmacy operations in Kentucky, Illinois and Indiana. Leading Over The Counter is a blog of Joey's views and opinions on the topics of pharmacy leadership and management and do not represent the University of Maryland, Baltimore. Joey can be followed on Twitter @joeymattingly.

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