nep-hea New Economics Papers
on Health Economics
Issue of 2006‒01‒01
fourteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. The sustainability of health spending growth By Glenn Follette; Louise Sheiner
  2. Differential mortality, uncertain medical expenses, and the saving of elderly singles By Mariacristina De Nardi; Eric French; John Bailey Jones
  3. Information and drug prices: evidence from the medicare discount drug card program By Emin M. Dinlersoz; Han Li; Roger Sherman; Ruben Hernandez-Murillo
  4. On the Optimal Staffing of Surgeons and Efficient Scheduling of Surgeries at a High-Volume Eye Hospital By Desai Tejas A
  5. The Future of Drug Development: The Economics of Pharmacogenomics By John A. Vernon; W. Keener Hughen
  6. Fast-Food Restaurant Advertising on Television and Its Influence on Childhood Obesity By Shin-Yi Chou; Inas Rashad; Michael Grossman
  7. Psychiatric Disorders and Labor Market Outcomes: Evidence from the National Latino and Asian American Study By Pinka Chatterji; Margarita Alegria; Mingshun Lu; David Takeuchi
  8. The Myth of the Drinker%u2019s Bonus By Philip J. Cook; Bethany Peters
  9. Product cycles, innovation and exports: A study of Indian pharmaceuticals By Alka Chadha
  10. Trips and Patenting Activity: Evidence from the Indian Pharmaceutical Industry By Alka Chadha
  11. Patent Races, “Me-Too” Drugs, and Generics: A Developing-World Perspective By Alka Chadha; Åke Blomqvist
  12. Public health in India : an overview By Das Gupta, Monica
  13. Health systems in East Asia : what can developing countries learn from Japan and the Asian tigers ? By Wagstaff, Adam
  14. Disability, poverty, and schooling in developing countries : results from 11 household surveys By Filmer, Deon

  1. By: Glenn Follette; Louise Sheiner
    Abstract: We evaluate the long-run sustainability of health spending growth. Under the criterion that non-health consumption does not fall, one percent excess cost growth appears to be an upper bound for the economy as a whole when the projection horizon extends over the century, although some groups would experience declines in non-health consumption. More generally, the increase in health spending as a share of income may lead to a significant expansion of public sector financing, as has been the case historically. Extrapolation of historical trends also suggests that higher health spending will lead to insurance contracts with lower out-of-pocket payment shares, putting further upward pressure on health care expenditures.
    Date: 2005
  2. By: Mariacristina De Nardi; Eric French; John Bailey Jones
    Abstract: People have heterogenous life expectancies: women live longer than men, rich people live longer than poor people, and healthy people live longer than sick people. People are also subject to heterogenous out-of-pocket medical expense risk. We show that all of these dimensions of heterogeneity are large for the elderly. Can these factors explain their lack of asset decumulation even at very advanced ages and the high saving rate of the income-rich elderly? We answer this question in two steps. We first estimate the uncertainty about mortality and outof pocket medical expenditures as functions of sex, health, permanent income, and age. We then formalize a rich structural model of saving behavior for retired single households, and we estimate it by using the method of simulated moments.
    Keywords: Savings banks ; Medical care, Cost of
    Date: 2005
  3. By: Emin M. Dinlersoz; Han Li; Roger Sherman; Ruben Hernandez-Murillo
    Abstract: In early 2004, the U.S. Government initiated the Medicare Discount Drug Card Program, under which a large amount of pharmacy-level price data pertaining to over 800 drugs has been released weekly on the Medicare website continuously between May 29, 2004 and October 2005. This extensive information release was intended to facilitate access to prices that are offered by drug card sponsors to Medicare eligible, with the hope of promoting competition among sponsors. This paper utilizes a large sample of pharmacy level drug price data collected from the Medicare website for several weeks to answer the following questions: i) Did the program generate significant dispersion in prices across drug cards, across pharmacies, or across geography?, ii) Did the dispersion and the average of prices change over time?, iii) Are the observed patterns consistent with theories of consumer search and improved access to information?, iv) Did the program had the intended effects of promoting competition between drug card sponsors?, v) How are the observed effects related to the design and the institutional environment of the program?, and vi) What are the broader implications of the findings for the role of public information policy in the functioning of markets?
    Keywords: Drugs ; Medical care, Cost of
    Date: 2005
  4. By: Desai Tejas A
    Abstract: It is well-known that the demand for services at many if not all hospitals is variable over a given year such that the demand is significantly higher in some months compared to the rest of the months in any given year. This is especially true for surgical departments at many hospitals. Therefore, it is a challenge to staff the surgical departments in such a way that the demand for surgeries throughout a year is met without creating significant over- or under-staffing at any point in a given year. In other words, an optimal level of staffing is sought so that the staff is not significantly over- or under- utilized at any point in a given year. In this paper, we consider an algorithmic approach of arriving at such an optimal level of staffing given some practical constraints. We apply this approach to the surgery department of the paying section of the Aravind Eye Hospital in Madurai, India.
    Date: 2005–12–27
  5. By: John A. Vernon; W. Keener Hughen
    Abstract: This paper models how the evolving field of pharmacogenomics (PG), which is the science of using genomic markers to predict drug response, may impact drug development times, attrition rates, costs, and the future returns to research and development (R&D). While there still remains an abundance of uncertainty around how PG will impact the future landscape of pharmaceutical and biological R&D, we identify several likely outcomes. We conclude PG has the potential to significantly reduce both expected drug development costs (via higher probabilities of technical success, shorter clinical development times, and smaller clinical trials) and returns. The impact PG has on expected returns is partially mitigated by higher equilibrium prices, expedited product launches, and longer effective patent lives. Our conclusions are, of course, accompanied by numerous caveats.
    JEL: I10 I11 I12
    Date: 2005–12
  6. By: Shin-Yi Chou; Inas Rashad; Michael Grossman
    Abstract: Childhood obesity around the world, and particularly in the United States, is an escalating problem that is especially detrimental as its effects carry on into adulthood. In this paper we employ the 1979 Child-Young Adult National Longitudinal Survey of Youth and the 1997 National Longitudinal Survey of Youth to estimate the effects of fast-food restaurant advertising on children and adolescents being overweight. The advertising measure used is the number of hours of spot television fast-food restaurant advertising messages seen per week. Our results indicate that a ban on these advertisements would reduce the number of overweight children ages 3-11 in a fixed population by 10 percent and would reduce the number of overweight adolescents ages 12-18 by 12 percent. The elimination of the tax deductibility of this type of advertising would produce smaller declines of between 3 and 5 percent in these outcomes but would impose lower costs on children and adults who consume fast food in moderation because positive information about restaurants that supply this type of food would not be banned completely from television.
    JEL: I10 I12
    Date: 2005–12
  7. By: Pinka Chatterji; Margarita Alegria; Mingshun Lu; David Takeuchi
    Abstract: This paper investigates to what extent psychiatric disorders and mental distress affect labor market outcomes among ethnic minorities of Latino and Asian descent, most of whom are immigrants. Using data from the National Latino and Asian American Study, we examine the labor market effects of meeting diagnostic criteria for any psychiatric disorder in the past 12 months as well as the effects of psychiatric distress in the past year. Among Latinos, psychiatric disorders and mental distress are associated with detrimental effects on employment and absenteeism, similar to effects found in previous analyses of mostly white, American born populations. Among Asians, we find mixed evidence that psychiatric disorders and mental distress detract from labor market outcomes.
    JEL: I1
    Date: 2005–12
  8. By: Philip J. Cook; Bethany Peters
    Abstract: Drinkers earn more than non-drinkers, even after controlling for human capital and local labor market conditions. Several mechanisms by which drinking could increase productivity have been proposed but are unconfirmed; the more obvious mechanisms predict the opposite, that drinking can impair productivity. In this paper we reproduce the positive association between drinking and earnings, using data for adults age 27-34 from the National Longitudinal Survey of Youth (1979). Since drinking is endogenous in this relationship, we then estimate a reduced-form equation, with alcohol prices (proxied by a new index of excise taxes) replacing the drinking variables. We find strong evidence that the prevalence of full-time work increases with alcohol prices – suggesting that a reduction in drinking increases the labor supply. We also demonstrate some evidence of a positive association between alcohol prices and the earnings of full-time workers. We conclude that most likely the positive association between drinking and earnings is the result of the fact that ethanol is a normal commodity, the consumption of which increases with income, rather than an elixer that enhances productivity.
    JEL: I12 J24
    Date: 2005–12
  9. By: Alka Chadha (Department of Economics, National University of Singapore)
    Abstract: This paper sheds light on the product cycle and neotechnology theories of trade in the context of generic pharmaceuticals. The paper studies the export performance of 177 Indian pharmaceutical firms for the post- liberalization period 1991-2004. The results indicate that technology proxied by foreign patent rights has a positive impact on exports. This suggests that developing countries with innovation skills for process innovations are capable of penetrating international markets in the later stages of the product cycle by using patents, which were the barriers to trade in the early stages of the product cycle. Thus, Indian pharmaceutical firms adept at reverse-engineering of brandname drugs have an opportunity to enter the global generic market for off-patent drugs.
    Keywords: Product cycle, Exports, Foreign patents, Pharmaceuticals
    JEL: L65 O34 F1
  10. By: Alka Chadha (Department of Economics, National University of Singapore)
    Abstract: This paper studies the impact of the strict patent regime on the patenting activity of Indian pharmaceutical firms and finds that patenting activity of these firms has increased after the signing of TRIPs. The study is conducted for 65 pharmaceutical firms for the period 1991 to 2004 using different parametric and semiparametric count panel data models. Results across different count data models indicate a positive and significant impact of the introduction of stronger patents on patenting activity. Further, the results show a gestation lag of two years between R&D spending and patent applications.
    Keywords: Pharmaceuticals, Patents
    JEL: L65
  11. By: Alka Chadha (Department of Economics, National University of Singapore); Åke Blomqvist (Department of Economics, National University of Singapore)
    Abstract: We build a model of pharmaceutical markets in the light of a patent race among competing firms. The incentive for R&D is the patent on either the breakthrough or the me-too drug. A feature of our model that has not been analyzed before is the prevalence of insurance in developed countries as opposed to developing countries, such that the true burden of financing R&D falls to a greater extent on the former than the latter. We suggest that generics drugs be allowed in low-income countries, particularly since most of them do not have a well-established and functioning pharmaceutical industry.
  12. By: Das Gupta, Monica
    Abstract: Public health services, which reduce a population ' s exposure to disease through such measures as sanitation and vector control, are an essential part of a country ' s development infrastructure. In the industrial world and East Asia, systematic public health efforts raised labor productivity and life expectancies well before modern curative technologies became widely available, and helped set the stage for rapid economic growth and poverty reduction. The enormous business and other costs of the breakdown of these services are illustrated by the current global epidemic of avian flu, emanating from poor poultry-keeping practices in a few Chinese villages. For various reasons, mostly of political economy, public funds for health services in India have been focused largely on medical services, and public health services have been neglected. This is reflected in a virtual absence of modern public heal th regulations and of systematic planning and delivery of public health services. Various organizational issues also militate against the rational deployment of personnel and funds for disease control. There is strong capacity for dealing with outbreaks when they occur, but not to prevent them from occurring. Impressive capacity also exists for conducting intensive campaigns, but not for sustaining these gains on a continuing basis after the campaign. This is illustrated by the near eradication of malaria through highly organized efforts in the 1950s, and its resurgence when attention shifted to other priorities such as family planning. This paper reviews the fundamental obstacles to effective disease control in India and indicates new policy thrusts that can help overcome these obstacles.
    Keywords: Health Monitoring & Evaluation,Health Economics & Finance,Brown Issues and Health,Public Sector Management and Reform,Rural Development Knowledge & Information Systems
    Date: 2005–12–01
  13. By: Wagstaff, Adam
    Abstract: The health systems of Japan and the Asian Tigers--Hong Kong (China), the Republic of Korea, Singapore, and Taiwan (China)--and the recent reforms to them provide many potentially valuable lessons to East Asia ' s developing countries. All five systems have managed to keep a check on health spending despite their different approaches to financing and delivery. These differences are reflected in the progressivity of health finance, but the precise degree of progressivity of individual sources and the extent to which households are vulnerable to catastrophic health payments depend too on the design features of the system-the height of any ceilings on social insurance contributions, the fraction of health spending covered by the benefit package, the extent to which the poor face reduced copayments, whether there are caps on copayments, and so on. On the delivery side, too, Japan and the Tigers offer some interesting lessons. Singapore ' s experience with corporatizing public hospitals- rapid cost and price inflation, a race for the best technology, and so on-shows the difficulties of corporatization. Korea ' s experience with a narrow benefit package shows the danger of providers shifting demand from insured services with regulated prices to uninsured services with unregulated prices. Japan, in its approach to rate-setting for insured services, has managed to combine careful cost control with fine-tuning of profit margins on different types of care. Experiences with diagnosis-related groups in Korea and Taiwan (China) point to cost-savings but also to possible knock-on effects on service volume and total health spending. Korea and Taiwan (China) both offer important lessons for the separation of prescribing and dispensing, including the risks of compensation costs outweighing the cost savings caused by more " rational " prescribing, and cost-savings never being realized because of other concessions to providers, such as allowing them to have onsite pharmacists.
    Keywords: Health Monitoring & Evaluation,Health Economics & Finance,Health Systems Development & Reform,Health Law,Technology Industry
    Date: 2005–12–01
  14. By: Filmer, Deon
    Abstract: This paper analyzes the relationship between whether a young person has a disability, the poverty status of their household, and their school participation using 11 household surveys from nine developing countries. Between 1 and 2 percent of the population is identified as having a disability. Youth with disabilities sometimes live in poorer households, but the extent of this concentration is typically neither large nor statistically signif icant. However, youth with disabilities are almost always substantially less likely to start school, and in some countries have lower transition rates resulting in lower schooling attainment. The order of magnitude of the school participation disability deficit is often larger than those associated with other characteristics such as gender, rural residence, or economic status differentials.
    Keywords: Social Cohesion,Social Protections & Assistance,Gender and Law,Primary Education,Health Monitoring & Evaluation
    Date: 2005–12–01

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