Firms buy cost control sight unseen, with faith.
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In this paper, we describe the Dutch pharmaceutical market, which is heavily regulated by the government. Through the regulation of prices and promoting prudent use, the Dutch government tries to bring down the cost of pharmaceuticals, which increases every year at a higher rate than total health care expenditure. The complex system of regulation, especially aimed at cost containment, is not very effective, particularly with respect to controlling outpatient pharmaceutical expenditure. Moreover, the system has few incentives towards efficiency. Though the market share of generic pharmaceuticals is rapidly growing, pharmaceutical expenditure has not decreased accordingly. The discounts offered by wholesalers of generic products to pharmacists produce private rather than societal gains from generic prescriptions. Dismantling the current regulatory system, boosting competition and efficiency with insurers in a leading role, seems to be the way forward.
Governments in Canada have instituted mechanisms intended to control drug prices. These include the establishment of a semi-judicial body by the federal government to control factory-gate prices and of various measures at the provincial level, such as formulary management, use of generics, reference-based pricing, price freezes, and limits on markups. To a large extent, these measures have been effective in price control. Total drug spending in the country continues to rise, however; clearly, mechanisms other than price controls will need to be developed if drug spending is to be better managed.
Here's one great example of how plans and at-risk providers can slash pharmacy costs. TriCast, a Milwaukee-based pharmacy risk modeling firm, can enable capitated providers to achieve optimum results from pharmacy risk through a unique pharmacy carve-out program.
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