The dynamics of prescription drug utilization
The determinants and consequences of prescription drug use are wide ranging. The research and policy literatures often examine pharmaceutical demand from a static or narrow perspective. Treatment guidelines, for example, are based on population averages for isolated conditions. Many clinicians and policy makers argue pharmaceuticals, such as statins, are under-used either due to uninformed non-compliance or because utilization may reduce non-pharmaceutical medical expenditures. Patients and physicians, however, have more information regarding individual patient heterogeneity. While it is well understood that pharmaceutical demand may depend upon age, health status, and insurance, these factors are inputs in a broader life-cycle problem. The papers in this session examine this broader context empirically while employing methods that reflect the dynamic aspects of the underlying problem. Philipson and Egan develop a structural model pharmaceutical adherence that allows patients to learn about and respond to their own idiosyncratic treatment benefits. Evidence from calibration suggest that the welfare inefficiency of over-adherence actually exceeds the cost of under-adherence. Barthold examines potential spillover effects of pharmaceutical utilization on other medical expenditures. Using the introduction of Medicare Part D as a natural experiment he finds no evidence of cost-reducing spillovers. Finally, Bishop et al. develop a dynamic structural model of human capital investment, pollution exposure, and pharmaceutical demand. Their model recognizes the tradeoffs between health risk and medical care. They focus on the relationship between pollution exposure and the potential for individual remediation through pharmaceutical consumption.