Does perverse economic incentive lead to the irrational uses of medicines?

Keywords::

• economic incentives
• essential medicine policy
• irrational use of medicines
• pre-payment
• profit-seeking behavior
• zero mark-up policy

The irrational use of medicines is a major problem worldwide. The WHO estimates that more than half of all medicines are prescribed, dispensed or sold inappropriately, and that half of all patients fail to take them correctly [101]. Examples of irrational use of medicines include [101]; use of too many medicines per patient (poly-pharmacy); inappropriate use of antimicrobials, often in inadequate dosage, for non-bacterial infections; overuse of injections when oral formulations would be more appropriate; failure to prescribe in accordance with clinical guidelines; inappropriate self-medication, often using prescription-only medicines; non-adherence to dosing regimens, etc. The overuse, underuse or misuse of medicines results in the wastage of scarce health resources and widespread public health hazards.

There are many possible causal factors for the irrational use of medicines in different countries. Few of them are: lack of skill and knowledge of both providers and patients; limited resources; a large patient burden; economic incentives from selling medicines; and lack of effective control and regulation on drug use [102]. However, information asymmetry in healthcare plays a role as well, as it is hard for patients to make their own decisions on appropriate use of medicines, so that medical professionals become the agents to aid the patients in making the decision on the therapies. Thus, it makes the causal factors of irrational use of medicine from the providers’ side more crucial. The purpose of this editorial is to discuss the current situation of irrational use of medicines, analyze the relationship and connection between economic incentives and irrational use of medicines and suggest practical interventions to mitigate the problem.

A long-standing issue that can no longer be ignored

According to WHO, rational use of medicines requires that ‘patients receive medications appropriate to their clinical needs, in doses that meet their own individual requirements, for an adequate period of time and at the lowest cost to them and their community’[102].

However, the current situation does not reflect this. Overuse of antibiotics and intravenous (iv.) injections, inappropriate course length for antibiotics and poly-pharmacy are common in medical practice in China. A cross-sectional study in 680 primary health clinics in villages from 10 provinces of Western China indicated that [1] the percentage of prescriptions with antibiotics was 48.43% (range: 41.12–57.47). Another nationwide research in 28 cities from 28 provinces of China reported that [2] there were 43.48% prescriptions for antibiotics per 100 total prescriptions. This exceeds the WHO’s threshold for rational use of antibiotics. Moreover, there is a trend that broad-spectrum antibiotics and new generation of antibiotics are more popular and widely used in China [3]. Both overuse and abuse of antibiotics increases the risk of antimicrobial resistance. It is estimated that <30% of patients take the appropriate course of medication [4]. This also contributes to the high antimicrobial resistance rate in China. A worsening problem, that has posed an increasing challenge, is fighting many diseases including MDRTB, which is mainly caused by the poor compliance of patients to anti-TB drugs. The percentage of poly-pharmacy was reported as 5.8% [5], which would increase the risks of side effects or adverse reactions emanating from different medicines. Another noticeable fact is the overuse of injections in China. It was reported [2,5,6] that 22.93–61% of encounters were prescribed with injections at different levels of health institutions. It is a waste of resources (both materials and the services of healthcare professionals) while oral formulations can have similar therapeutic effects.

Perverse economic incentives: the invisible hand behind irrational use

Since the healthcare system is complicated and connected with many stakeholders, there are many causal factors for irrational use. Lack of knowledge of both providers and patients is one of the main reasons. However, irrational use of medicine also exists among well-trained doctors in teaching hospitals. At the same time, well-educated patients, even doctors, may ask for antibiotics when they catch a cold. The hypothesis of ‘rational people’ in economics could be a reasonable explanation. The perverse economic incentives behind prescriptions, to some extent, drive the irrational use of medicine.

Just take China for instance, there has been a boom in healthcare facilities over the past three decades, attention has been focused on the primary healthcare centers, and big hospitals were expanded. However, the government subsidy failed to grow as fast as the expansion of facilities. The subsidy shrank sharply from 60% of revenue in public hospitals in early 1980s to 24.73% by 2008 [7]. Then came the ‘mark-up’ policy, which permitted hospitals to take a 15% markup for western drugs and 20–25% for manufactured TCM between wholesale and retail prices. This percentage of drug markup may be higher in reality due to negotiation power from hospitals and promotional activities from manufacturers. According to figures cited by the China Daily, 60–70% of grassroots health institutions run on the profits made from medicine prescriptions [103]. However, there was a strict ceiling price regulation from government on medicines. As a result, hospitals seek profits by using expensive medicines and prescribing more medicines than necessary. In many occasions physicians can get bonus directly from the manufacturers by prescribing their products, as the GSK’s case reported [104], it is reported that US$489 million was spent by GSK since 2007 in this way. Under this circumstance, profit-seeking behaviors and failures to prescribe in accordance with clinical guidelines occur. Induced demands such as abuse of new generation antibiotics, poly-pharmacy and long-course of treatment are not uncommon.

Economic incentives also have interactive effects with the lack of knowledge of both providers and patients. Some physicians are not qualified enough and some primary care centers do not have enough devices to assist physicians to make diagnoses. Only 29.21% of patients receiving therapeutic antimicrobial agents sent samples for pathogenic detection [8]. Broad-spectrum antibiotics seem to be wise choices for them. From the patients’ side, the fast relief of symptoms by antibiotics and the iv. injections make them believe that they are more effective, especially good for kids, while the negative side was ignored. Sometimes patients would ask physicians for ‘effective and strong’ medicines, which were often meant to suggest antibiotics and iv. injection. Providers have to meet patients’ demands; otherwise they may have the possibility of losing their clients.

Another interactive factor with economic incentives is to avoid medical accidents. Physicians prescribed broad-spectrum antibiotics to prevent potential infection, and lots of antibiotics used for prophylaxis are dictated from inpatient records (39.17%) [8]. Many doctors admitted that they would prescribe antibiotics even though they knew that it is ineffective, typically citing patient demand [9]. If they did not meet patients’ requirements and patients’ conditions were getting worse, they were likely to be blamed by patients. So that prescribing antibiotics can bring more revenue and avoid medical disputes at the same time.

The current provider payment system also contributes to the profit seeking behavior of healthcare providers. First of all, patients tend to be insensitive to the medical expenditure because of high reimbursement rates often provided by health insurance schemes. Many studies already show that patients covered by health insurance scheme tends to have higher medical expenditure than those uncovered, and the higher the reimbursement rate of the scheme, the higher the medical expense [10]. The existence of the third party for the payment provides convenience for induced demands and relief the guilty of physicians. In addition, the retrospective payment methods such as fee-for-service, are employed, as one main method, to pay for health services in China. The settlement between health insurance and facilities are passive, no performance assessment is usually required and the quantity rather than quality of services are the only determinants of the revenue of hospitals. All this has encouraged the profit-seeking behavior of healthcare providers.

Changing economic incentives: a visible hand is necessary

Although market is regarded as free competition, high quality and efficiency governance is necessary for medicines and health services. A thorough revolution is necessary to improve the rational use of medicines. Even though resistance from stakeholders is inevitable, a sensible prescribing and supply system of medicines with appropriate incentives and performance evaluation mechanism will provide better financial risk protection and promote people’s health. Given the crucial role of providers in the rational use of medicine, more policy measures should be developed to take on service providers in China.

Removing perverse economic incentives: separating medicine sale from service provision

In developed countries, pharmacies are operated independently from hospitals. Patients can get medicines in pharmacies with their prescriptions from doctors. The pharmacies are chosen depending on patients’ free will, so that no previous-agreed bonus for physicians would exist, which prevent the generation of perverse economic incentives from prescriptions. Without this driving-profit, there is no incentive for physicians to prescribe expensive and overdose medicines. For countries like China and Vietnam, where pharmacies are affiliated to hospitals, ‘zero mark-up policy’ could cover the transitional phase. A fixed prescription fee could take the place of mark-up policy so as to ensure the revenue of hospitals, and at the same time ensure valuing the work of medical professionals. In addition, clinical pharmacists should play a more important role in making personalized treatment plans for different patients.

Developing appropriate economic incentives: performance-based prepayment mechanism.

Economic incentive is a good tool to improve efficiency and quality under appropriate guidance. Quality-oriented and prepayment mechanism fit the requirements. Diagnosis-Related Groups, global budget and capitation are the three major prepayment mechanisms in developed countries. With a core mechanism as performance assessment, it could set up a new connection between level of payment and health output and its nature of pre-paid also provide initiative for hospitals and physicians. So that a well-designed, pre-paid, multiple and performance-based reimbursement system could not only provide positive and sustainable incentives for medical professional, improve the efficiency of resource, bring prosperous development for hospitals, but also promote the rational use of medicine and health outcomes.

Effective implementation of regulation of prescription policies: essential medicine list and clinical guidelines

The WHO has advocated the essential medicine list for over 30 years. Essential medicines are those that satisfy the priority healthcare needs of the population, in adequate amounts, in appropriate dosage forms, with assured quality and adequate information, and at a price the individual and community can afford, while selected with due regard to public health relevance, evidence on efficacy and safety, and comparative cost-effectiveness [102]. It is the time for government to organize experts in clinical, pharmacy, epidemiology and pharmacoeconomics to update and revise essential medicine list based on evidence.

With the help of essential medicine list, it is much easier for healthcare providers to regulate and standardize their daily practices so as to achieve the rational use of medicine. Clinical guidelines and clinical pathway have similar role in regulating the prescription behaviors.

Other practical measures include increasing the subsidy from government, which could provide a better environment for the development of hospitals; regulation on the prescription behavior such as prescription audit could be an additional effective measure to the pre-paid reimbursement mechanism, which means irrational use of medicines could lead to the decrease in reimbursement from insurance.

At the same time, it is also wise to encourage rational use of medicine by the patient. The general public should be educated to be aware of the harms irrational use of medicines can bring about, and have common sense and correct perceptions about the role of medicines in fighting against diseases. They should be empowered to resist the rational use of medicines, sometimes posed by doctors. Economic incentives, such as cash, discount on the insurance premium and free medical services, should also be set by the insurance scheme so as to make patients more sensitive with the medical expense and eliminate the induced-demand.

Now the world is threatened with both chronic diseases and communicable diseases with limited health resources. It’s time for the whole society to lay more attention to the rational use of medicine and the economic incentives should be used more wisely to promote the rational use of medicine.

Financial & competing interests disclosure

The authors have no relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties.

No writing assistance was utilized in the production of this manuscript.