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Patient Welfare and Patient Compliance

Patient Welfare and Patient Compliance

An Empirical Framework for Measuring the Benefits from Pharmaceutical Innovation

(p.539) 14 Patient Welfare and Patient Compliance
Medical Care Output and Productivity
Paul EllicksonScott SternManuel Trajtenberg
University of Chicago Press

The pharmaceutical industry's innovative output consists primarily of a small number of new drugs, each of which is required to receive approval from the U.S. Food and Drug Administration. This chapter uses an empirical framework to evaluate patient welfare based on patient compliance. Extending previous studies of the welfare benefits from innovation, it unpacks the separate choices made by physicians and patients in pharmaceutical decision making and develops an estimable econometric model which reflects these choices. The proposed estimator for patient welfare depends on whether patients comply with the prescriptions they receive from physicians and the motives of physicians in their prescription behavior. By focusing on compliance behavior, the proposed welfare measure reflects a specific economic choice made by patients. Relying on recent advances in the study of differentiated product markets, a discrete choice model is developed that lends itself naturally to the evaluation of welfare gains from pharmaceutical innovation.

Keywords:   pharmaceutical industry, patient welfare, patient compliance, decision making, pharmaceutical innovation, physicians, patients, prescriptions, discrete choice model

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