tag:blogger.com,1999:blog-7565372830978560947.post1872459998047926960..comments2024-01-29T23:18:36.413+13:00Comments on Sex, Drugs and Economics: The welfare impacts of the 2013 prescription fee increasesMichael Cameronhttp://www.blogger.com/profile/03901095087438726552noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7565372830978560947.post-83564065497319200272016-02-09T08:19:45.046+13:002016-02-09T08:19:45.046+13:00That is a good point. If a prescription medication...That is a good point. If a prescription medication provides a benefit to others in addition to the benefit it provides to the person taking the medication, then there is a positive externality that should be taken into account. For example, vaccines provide an obvious benefit to others, as do cures for communicable diseases. However, treatments for non-communicable diseases don't provide the same external benefits [*]. And it turns out that most of the prescription spend (see http://www.waikatodhb.health.nz/assets/about-us/agendas/CPHAC/2014/august/5.2.pdf) is on immunosuppressants, chemotherapy, asthma, diabetes, pain relief, etc.). Of course, that is the spending by Pharmac which is in the wholesale (not retail) market and the medications for immunosuppression and chemotherapy are extremely expensive. However, if we looked at the DHB spend (which I can't find online) it's probably unlikely to show a heavy shift towards communicable disease and vaccines. So, ignoring the externalities for simplicity might not be too far wrong.<br /><br />Having said that, if we included a positive externality the effect of reducing the subsidy on consumers and pharmacists would be the same (consumer surplus decreases and producer surplus decreases), but total welfare would increase.<br /><br />[*] It is possible to argue that treatment for non-communicable diseases now reduces the burden on the healthcare system in the future, providing an external benefit for future taxpayers. For example, a person taking statins to manage high cholesterol is at reduced risk of heart disease in the future, reducing the expected cost to the health system in the future. <br />Michael Cameronhttps://www.blogger.com/profile/03901095087438726552noreply@blogger.comtag:blogger.com,1999:blog-7565372830978560947.post-83716878424728105402016-02-09T03:25:27.926+13:002016-02-09T03:25:27.926+13:00The marginal social benefit may also include any p...The marginal social benefit may also include any positive externalities to society from better population health. In which case Q1 or Q2 could well be the more efficient outcome, depending upon how you judge the size of the externality, with no dead weight loss.Anonymousnoreply@blogger.com