Medical Providers as Double Agents in a Universal Health Care System: Evidence from Generic Pharmaceutical Adoption in Taiwan

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This paper investigates medical providers’ generic pharmaceutical adoption in Taiwan, stresses that this decision involves the interests of providers, patients and insurance payer. We examine this prescription behavior using Taiwanese data because patients and physicians did not self-select their insurance plans under a universal health care system. Physicians in Taiwan also respond to strong financial incentives because they are allowed to both prescribe and dispense drugs. The empirical results show that a larger price difference between brand-name and generic drugs increases physicians’ likelihood for prescribing generic prescriptions. However, this effect decreases as the payer’s cost share percentage increases. This study also demonstrates that some physicians prescribed more generic drugs than the others, including the hospital and clinic owners, and the ones practicing in clinics and private institutions.