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A considerable number of studies have sought to examine the determinants of elderly health. Nevertheless, few of them incorporate a life-course perspective to analyze the dynamics of transition for both health conditions and their predictors. We utilize a nationally representative longitudinal data set of 4007 Taiwanese aged 60 or over and employ discrete-time duration models to investigate the association between annual mortality and its potential risk factors over a nearly twenty-year period (1989–2007). We place particular emphasis on the inherently dynamic character of Grossman's model, and specifically on how public and private health investment shape the personal health outcome over time. Our results support the hypothesis that depreciation rates depend on personal characteristics. In addition, we find that the dynamic profiles of both public and private health investment significantly influence the elderly mortality. An important implication of our study is that implementing universal health insurance and tobacco control programs are effective channels through which the government improves personal health.

This article investigates the determinants of the prices of pharmaceuticals and their impact on the demand for prescription drugs in the context of Taiwan's pharmaceutical market where medical providers earn profit directly from prescribing and dispensing drugs. Based on product-level data, we find evidence that the profit-seeking behavior of the medical providers in the prescription drug market transfers the force of competition from the unregulated wholesale market to the regulated retail market and hence market competition still plays an important role in the determination of the regulated price. We also find that the profit-seeking behavior plays a similar role to advertising in that it increases the brand loyalty and hence lowers price elasticity. An important implication of our study is that the institutional features in the pharmaceutical market matter in shaping the nature of pharmaceutical competition and the responsiveness of pharmaceutical consumption with respect to changes in price.

Objective To provide an overview of the use of biologics in Taiwan, including the access to new biologics, the impact of this access on the growth of health-care expenditure, and the utilization patterns. Methods We first conducted a market-level analysis to investigate the availability of global biologics in Taiwan as well as the growth and concentration of aggregate spending on biologics. We then conducted a patient-level analysis to investigate the costs and utilization patterns for selected new biologics. Results We found that the concentration index is such that the 20 leading biologics in Taiwan account for more than 90% of the total spending on biologics. In our patient-level study on four biologics, the annual cost of treatment per patient ranged from NT$100,000 to NT$400,000. The prevalence rate of the user was between 6.5 and 37.2 per 100,000 of population. The treatment costs were inversely related to the prevalence rate of users. We also found that physicians in larger and public hospitals were more likely to prescribe new biologics to their patients compared with their counterparts practicing in smaller and private hospitals. In addition, we found that physicians were more likely to prescribe biologics to patients with more severe diseases and higher comorbidities. Conclusions We conclude that public spending on biologics in Taiwan is highly targeted toward about 20 products with higher annual expenditures and growth rates and that the utilization of these biologics is targeted at a small number of patients. In addition, the access to these costly biologics is not uniform among patients in a country with universal coverage for prescription drugs.

This paper tests the hypothesis of whether or not financial incentives affect a physician's prescription decision on the choice of generic versus brand-name drugs within a system in which physicians prescribe and dispense drugs. By using data obtained from Taiwan and focusing on diabetic patients, our empirical results provide several consistent findings in support of the hypothesis that profit incentives do affect the physician's prescribing decision, suggesting that physicians act as imperfect agents. An important implication of our findings is that rent seeking for profit margin between the reimbursement and the acquisition price instead of reducing costs is the major driving force behind generic substitution. As a result, the providers instead of the payers or consumers reap the financial benefits of generic substitution.

Goals To estimate the direct medical costs involved in the treatment of chronic hepatitis B (CHB) patients in Taiwan from a public resource perspective. Background Taiwan is a hepatitis B virus (HBV)-hyperendemic area that has considerable expertise in conducting hepatitis studies. To date, however, these studies have focused on basic science or clinical research associated with hepatitis B, and little attention has been paid to the social and monetary consequences of treatment and vaccination programs in Taiwan. Study Total per-patient annual costs were calculated for each of five disease states associated with hepatitis B infection. Method Claims data of National Health Insurance in 2000 were used to identify patients with CHB and to estimate breakdown costs of their medical usage. Medical costs included hospital admissions and outpatient visits, with fees being reimbursed by the National Health Insurance system and patient co-payments. Results The average total costs per patient for each disease state in the year 2000 were as follows: CHB without cirrhosis, 4905 new Taiwan dollars (NT dollars); compensated cirrhosis, NT 6,574 dollars; decompensated cirrhosis, NT 36,621 dollars; hepatocellular carcinoma, NT 95,741 dollars; and liver transplantation, NT 199,725 dollars. These values indicate that, as the disease progresses, the cost of medical care increases significantly. Conclusion The total inpatient cost for CHB infection in Taiwan for the year 2000 was almost NT 800 million dollars, which accounts for approximately 1% of the total inpatient expenditure. CHB is a significant burden on the Taiwanese healthcare system that could be limited by slowing or reversing liver disease progression.

Payment incentives to both consumers and providers have significant consequences for the equity and efficiency of a healthcare system, and have recently come to the fore in health policy reforms. This review first discusses the economic rationale for the apparent international convergence toward payment systems with mixed demand- and supply-side cost sharing. The recent payment reforms undertaken in Taiwan, South Korea and China are then summarised. Available evidence clearly indicates that payment incentives matter, and, in particular, that supply-side cost sharing can improve efficiency without undermining equity. Further study and monitoring of health service quality and risk selection is warranted.

As the population ages, the number of people living with Alzheimer's disease (AD) has been increasing over time. Between 1999 and 2006, four new AD drugs were approved for insurance coverage in Taiwan.We investigate the heterogeneous influences of adopting these new drugs on healthcare expenditures. We also evaluate whether the adoption of pharmaceutical innovation creates any "offsetting" effect in the sense that an increase in one component of the health care costs is offset by the decrease in the other components of health care costs.AD patients are defined in this study as those who are diagnosed with ICD-9-CM code 331.0. Based on longitudinal insurance claims data, we identify 1,088 AD patients whose first diagnosis occurred between 1997 and 2007. After excluding the period before each patient's AD diagnosis, 4,629 patient-year observations are found to constitute an unbalanced panel data set used in this study. We employ the correlated-random-effects quantile regression (CREQR) method to explicitly control for the unobserved heterogeneity and to consider the heterogeneous influences of adopting new drugs on different points of the conditional distribution function of health expenditures.Our empirical findings are consistent with previous evidence that the adoption of pharmaceutical innovation is costly. To be specific, the expenditure-increasing effect is mainly reflected by the increase in expenditure on drugs in the outpatient sector. In addition, we find evidence of a significant offsetting effect in the sense that new-drug users tend to make less use of inpatient services. As a result, the net effect of adopting pharmaceutical innovation is heterogeneous across AD patients: the use of new drugs is expenditure-increasing for patients whose health care costs are distributed below the 75th quantile; by contrast, the use of new drugs is expenditure-neutral above the 75th quantile, that is, the increase in the drug costs is almost completely offset by the decrease in the inpatient expenditure.The adoption of pharmaceutical innovation for treating AD is associated with a significant offsetting effect for higher cost patients. Our results also show that the CREQR method supplements the traditional ordinary least squares (OLS) method to provide interesting information beyond the conditional mean of the distribution. In our study, CREQR estimates suggest that the marginal impact of adopting pharmaceutical innovation on health care costs is heterogeneous across AD patients.Given that the impact of adopting new AD drugs on health care costs is not uniform among patients, current payment regulations that impose simple clinical criteria to decide the eligibility of using new drugs, that is, a policy that adopts one size to fit for all, may become an access barrier to realizing the potential benefits of pharmaceutical innovation.Another potential source of the offsetting effect is that adopting new AD drugs may be beneficial to the reduction in the cost of long-term care. This is an important avenue for future research.

This paper empirically investigates the relationship between the health care expenditure of end-of-life patients and hospital characteristics in Taiwan where (i) hospitals of different ownership differ in their financial incentives; (ii) patients are free to choose their providers; and (iii) health care services are paid for by a single public payer on a fee-for-services basis with a global budget cap. Utilizing insurance claims for 11 863 individuals who died during 2005-2007, we trace their hospital expenditures over the last 24 months of their lives. We find that end-of-life patients who are treated by private hospitals in general are associated with higher inpatient expenditures than those treated by public hospitals, while there is no significant difference in days of hospital stay. This finding is consistent with the difference in financial incentives between public and private hospitals in Taiwan. Nevertheless, we also find that the public-private differences vary across accreditation levels.

Although the technological change in medicine has been widely recognized as the major driver of rising healthcare costs, there is very little research that directly estimates this effect. This paper uses both a single-equation and a simultaneous equations approach to empirically investigate the interactive relationship between technological innovation and the growth of health expenditure in the context of the pharmaceutical market in Taiwan. Based on observing 182 therapeutic groups between 1997 and 2006, we find evidence to support the argument that technological innovation and health expenditure are simultaneously determined as technological innovation and the growth of health expenditure are endogenous rather than exogenous. Specifically, we find that therapeutic groups associated with higher pharmaceutical expenditure are likely to attract more new products to the market. Meanwhile, therapeutic groups with more new products are associated with higher pharmaceutical expenditures. An important implication of the paper is that the cost containment policy will not only affect the growth of health expenditure, but will also affect the progress of technological innovation in the health sector.

In recent years, a substantial amount of technological progress in medicine has taken the form of pharmaceutical innovation. This paper uses the launch of a series of new drugs designed for treating type 2 diabetic patients as an example to investigate the determinants that affect the diffusion of new medical technology. Based on prescription-level data that are obtained from the national health insurance program in Taiwan, we find that the probability of prescribing new drugs declines as more competing products enter the pharmaceutical market. Meanwhile, physicians are less likely to prescribe new drugs to treat their patients as the provider market becomes less concentrated. These results suggest that the providers' incentives for cost reduction dominate incentives for quality improvement as markets become more competitive and hence an increase in market competition is associated with a decrease in the diffusion of new drugs. As a result, access to new drugs is not uniform among patients in a country with universal coverage for prescription drugs. An important implication of our study is that profit-seeking behavior among providers can become an access barrier to new medical technology.

Objectives To investigate the impact of adopting pharmaceutical innovations on the growth of pharmaceutical expenditures, focusing specifically on Taiwan's experience. Methods We first provide a descriptive analysis of cost impacts of introducing new drugs into Taiwan's national formulary using data from Taiwan. We then use a statistical method to decompose the growth of pharmaceutical expenditures during 1997–2001 into three components: 1) treatment expansion; 2) treatment substitution; and 3) price effect. By incorporating the estimated benefit from prior studies, we calculate the incremental cost-effectiveness ratio for new drugs as a whole. Results We find that from 1997 to 2001 public expenditures on pharmaceuticals grew 57%. The primary drivers of this expenditure growth were treatment expansion and treatment substitution. Prices declined by 18%. Cost per life-year gained resulting from introduction of new drugs was US$1053 (in 2003 dollars) from the perspective of the public payer and US$1824 from the perspective of society as a whole. Conclusions Overall, our analysis provides evidence with previous studies that the drug reimbursement price is not the primary driver of increased spending. Rather the introduction of new drugs into the formulary leading to expansion of treatment, expansion and substitution of the new drugs for existing drugs may increase spending. Although the adoption of pharmaceutical innovation is costly, the estimated benefit of adopting pharmaceutical innovation generally far exceeds the cost, indicating that the adoption of pharmaceutical innovation is on the whole worthwhile.

This paper uses a measure of health knowledge of smoking hazards to investigate the determinants of health knowledge and its effect on smoking behavior. In our analysis, two equations are estimated: smoking participation and health knowledge. The simultaneity problem in estimating smoking behavior and health knowledge is also considered. Overall, the estimated results suggest that anti-smoking campaigns have a significantly positive effect on the public's health knowledge, and this health knowledge in turn, has a significantly negative effect on smoking participation. The health knowledge elasticities of smoking participation are −0.48 and −0.56 for all adults and adult males, respectively.

South Korea, Singapore and Taiwan are well known as export-oriented developmental states which for decades employed industrial policy to target particular industries for government support. In the past fifteen years, these three countries all identified the biopharmaceutical industry as a strategic sector. This article explores, through economic analysis, the rationale for this decision and the strategies chosen for linking into the global bio-economy with the objective of catching up in biopharmaceuticals. The paper identifies three comparative advantages enjoyed by these countries in the biopharma sector: (1) public investments in basic research; (2) private investments in phase 1 clinical trials; and (3) a potentially significant contract research industry managing latter-stage clinical trials. Governments employ a range of industrial policies, consistent with these comparative advantages, to promote the biopharmaceutical industry, including public investment in biomedical hubs, research funding and research and development (R&D) tax credits. We argue that the most important feature of the biopharmaceutical industry in these countries is the dominant role of the public sector. That these countries have made progress in innovative capabilities is illustrated by input measures such as R&D expenditure as share of gross domestic product, number of patents granted and clinical trials, and volume of foreign direct investment. In contrast, output indicators such as approval of new chemical entities suggest that the process of catching up has only just commenced. Pharmaceutical innovation is at the stage of mainly generating inputs to integrated processes controlled by the globally incumbent firms.