In some countries, such as Canada and UK, direct-to-consumer (DTC) advertising for pharmaceutical products is illegal or tightly controlled. Which of the following is NOT a reason why DTC is tightly controlled? Question 7 options: Asymmetric information: consumers are not in a good position to determine if a drug is what they need. DTC makes patients aware of new remedies. DTC can put a strain on doctor-patient relationship when patients demand some drugs that are not necessary or not the best options. DTC have the potential to drive up spending on drugs and exacerbate moral hazard.

In some countries, such as Canada and UK, direct-to-consumer (DTC) advertising for pharmaceutical products is illegal or tightly controlled. Which of the following is NOT a reason why DTC is tightly controlled? Question 7 options: Asymmetric information: consumers are not in a good position to determine if a drug is what they need. DTC makes patients aware of new remedies. DTC can put a strain on doctor-patient relationship when patients demand some drugs that are not necessary or not the best options. DTC have the potential to drive up spending on drugs and exacerbate moral hazard.

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter5: Demand For Health And Medical Care

Section: Chapter Questions

Problem 9QAP

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In some countries, such as Canada and UK, direct-to-consumer (DTC) advertising for pharmaceutical products is illegal or tightly controlled. Which of the following is NOT a reason why DTC is tightly controlled? DTC have the potential to drive up spending on drugs and exacerbate moral hazard. DTC makes patients aware of new remedies. DTC can put a strain on doctor-patient relationship when patients demand some drugs that are not necessary or not the best options. Asymmetric information: consumers are not in a good position to determine if a drug is what they need.
Demand studies in health care have provided estimates of both income and price elasticity. Estimates of income elasticity are usually above +1.0. Estimates of price elasticity typically range between -0.1 and -.75 (with hospital services at the lower end and elective services at the upper end). What information do these estimates convey? What does the price elasticity of demand estimates imply for government policymakers, insurance companies, and medical providers' decisions? What does the income elasticity of demand estimates imply for government policymakers, insurance companies, and medical providers' decisions?
You have been recruited as an expert in health economics to recommend what is the best therapy for a group of patients. In the image below you will find the decision tree showing the probabilities for different health states and outcomes for patients undergoing two possible treatments, No drug therapy and Drug therapy. Based on the expected cost, which therapy would you recommend as the least expensive? Explain how you arrived at your recommendation and show your calculations the space provided. No drug theraphy ? Drug theraphy ? HEALTH STATES PROBABILITIES Remain in Good Health 0.5 Develop disease A 0.2 Develop disease B 0.2 Die 0.1 Remain in Good Health 0.53 Develop disease A 0.16 Develop disease B 0.22 Die 0.09 OUTCOMES (Costs) $0 $400 $300 $200 SO $800 $500 $0
Suppose a company has invented and patented a new effective drug to treat hay fever. The marginal cost of producing the drug is: MC = $4 . Without being covered in any insurance plan, the market demand is as follows: Qd = 800 -40P a. Suppose the drug is covered by a public health insurance plan with a co-insurance rate of 25% and everyone is eligible. What is the market demand under this insurance policy? What price should the company charge and what is the equilibrium quantity? a. Suppose now the public health insurer introduces the payment limit of $7.5 per unit of the drug; that is, the co-insurance rate of 25% applies if P less than or equal 10 (P<= 10), but the insurance only pays $7.5 per unit if P is greater than 10 P>10). Derive the new market demand. Under this new market demand, what price should the firm charge? Justify your answer.
13 2013200 P0004 Suppose that a new drug (A) has been approved to treat a life-threatening disease. The demand for that drug is shown on the accompanying graph by demand curve A Prior to approval of this drug, the only treatment for this condition was any one of several nonprescription, or over the counter, pain relievers. The demand for one brand of the several nonprescription pain relievers is also shown on the graph as demand curve B. Price 75 70 65 % 100 200 300 400 500 Quarsity At a price of $15 (the price at which the two demand curves intersect), the price elasticity of demand for the new drug is for the over-the-counter pain rellever the price elasticity of demand
Where is the bargaining power of consumers greater? 1) The auto industry 2) Pharmaceuticals explain your choice.
Price controls decrease the innovation rate for drugs but make existing drugs more affordable. True False
Moral hazard creates tradeoffs that complicate insurance design and policy choices. Imagine a linear demand curve for outpatient clinician visits, and assume at $100 per visit there would be 50,000 annual visits to a particular urban clinic. A politician would like to be popular, and proposes making clinic visits free (zero price). You know, as the city's staff health economist, that if this were to happen, the number of visits would rise to 75,000. Your job is to testify before the city council, and answer at least two questions: how much social welfare loss from moral hazard would occur; and how much tax money must be raised to finance clinic services if visits were made completely free? a. $2,500,000; $15,000,000 b. $5,000,000; $30,000,000 c. $1,250,000; $7,500,000 d. $3,750,000; $22,500,000
What effects would joining a MCO have on your clinic regarding staffing, patient volume, and financial stability?What policies and procedures should be used by the MCOs to reduce costs for their clientele?
Explain how the Orphan Drug Act would affect drug development. are there any tradeoffs from the act?
Imperfect competition and moral hazard. Some economists have argued that moral hazard and monopolistic health care markets are two socially inefficient problems that partially cancel each other out. Relative to the optimal level of health care Q∗, how much health care is provided in the presence of moral hazard? Assume perfectly competitive health care markets. Relative to the optimal level of health care Q∗, how much health care is provided in the presence of monopolistic health care markets? Assume no moral hazard. Write a one-sentence defense of the argument that moral hazard and imperfectly competitive health care markets could combine to provide a good level of health care provision Q.
Frustration over US pharmaceutical pricing has led researchers to develop frameworks for evaluation that can be used by any purchaser or patient making complex drug choices. One of the most prominent, the Institute for Clinical and Economic Review, uses clinical trial data and compares value -- per quality adjusted life year (QALY) -- under actual market pricing and other possible references prices for specific drugs. Do you think $/QALY is an appropriate metric for evaluating the value of new drugs?

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	Asymmetric information: consumers are not in a good position to determine if a drug is what they need.
	DTC makes patients aware of new remedies.
	DTC can put a strain on doctor-patient relationship when patients demand some drugs that are not necessary or not the best options.
	DTC have the potential to drive up spending on drugs and exacerbate moral hazard.