Three essays in the economics of pharmaceuticals

Drug utilization has become a more and more important component of health care services; therefore, pharmaceutical issues deserve more attention. My thesis consists of three essays in the economics of pharmaceuticals.

In the first essay, a model is developed to analyze drug price, supply, and social welfare in both the exporting country and the importing country in the presence of parallel trade. In existing studies, attention is mainly focused on question of price and social welfare in the importing country.

The second essay investigates the issue of equity in pharmaceutical utilization in Ontario and the influence of public drug insurance on equity. This is a two-dimensional study. First, I compare the equity in drug use between senior population and non-senior population. All seniors in Ontario have been universally covered by the publicly financed Ontario Drug Benefit (ODB) program. This is not the case for the non-senior population. This difference in coverage provides us with an opportunity to examine the impact of universal drug coverage on equity in drug utilization. Second, I examine the changes in equity for each population group at three time points: 1990, 1996/97 and 2000/01. We can then identify the influence of changes in drug coverage policies on equity.

The last essay investigates the issue of long-run costs of national catastrophic drug insurance in Canada. There are strong arguments that national catastrophic drug insurance should be established in Canada. In this essay, I project the long-run program costs for two different proposals: the proposals in the Kirby report and the proposals in the Romanow report. The method of cost projection is based on the property of underlying distribution of drug utilization and Monte Carlo simulation.