Comparison of Swiss and German Healthcare System

1. Summary of the Journal article: “Does Physician dispensing increase drug expendi-tures? Empirical Evidence from Switzerland?”

In the times of steadily rising healthcare expenditure relative to declining economic growth throughout many developed countries, it is vital for the governmental regulators to take into account possible inefficiencies of their healthcare system.

The empirical analysis of Boris Kaiser and Christian Schmid in 2014, is mainly concerned what financial impact the drug dispensing practice by physicians has on the overall Swiss healthcare system. These physicians act as both entrepreneurs and agents for their patients. The conflicting issue hereby is that dispensing physicians are allowed to prescribe drugs to their patients and this is linked to a markup earn on drug sales. This may subsequently lead to over-prescription of medication or a preference to prescribe a more expensive pharmaceutical, since this will subsequently lead to higher profits for the physicians. Ultimately this predica-ment increases the spending of Swiss insurance companies which means it is very much rele-vant for policy makers.

The Swiss health care system is organised on a federal level, with the responsibilities being spread across three levels: the federal government, the cantons and municipalities. The health system is complex due to the federal structure; the majority of the obligations lie with the can-tons. This important division of competencies enables Kaiser and Schmid to conduct this em-pirical analysis, since the coexistence of banned and allowed dispensing rules in Switzerland are available.

There is a need for compulsory health insurance in Switzerland, and the Swiss population has to insure themselves with the same basic coverage with one of the 58 private health insurance companies (Bundesamt für Gesundheit, 2015). This is another reason, why Switzerland is suitable for the analysis, since drug expenses are unlikely to influence the choice of insurance. The insured person pays his contribution in the form of a premium and in addition there is the possibility of voluntary supplementary insurance. A special feature of the Swiss insurance sys-tem is the widespread managed care model, with which the policyholder can reduce their premiums.

As far as drug pricing is concerned, all prices covered by mandatory insurance companies are federally regulated. Dispensing physicians impose a fee on the ex-factory price, which corre-sponds to the difference between the retail and ex-factory price. This markup increases with the retail price, which leads the physicians to overprescribe or settle for a more expensive sub-stitute. Pharmacies on the other hand collect this markup, including a consultation fee. The analysis focuses on real expenditure in order to appropriately compare drug costs between dispensing and non-dispensing physicians. Furthermore, it is restricted solely to German-speaking cantons, since the Italian and French part have banned dispensing. The appliance of the analytical results are limited to countries, where the incentive structure is similar to Swit-zerland.

The dataset was set up in a way that it differentiates between direct costs (dispensing costs), this is when a physician gives out the medication straight to the patient, and indirect costs, where patients will have to go to a pharmacy with a prescription from a physician. In that way, it is achievable to compare expenditures between two groups.

Physicians are divided into two groups, dispensing physicians who are the treatment group and non-dispensing physicians are the control group. By using the potential-outcomes frame-work, the study examines on how the dispensing practice of physicians effects drug expendi-ture. This is achieved through the method of deriving the population average treatment effect (ATE) and the population average treatment effect on the treated (ATT), both underlying two separate sets of assumptions. The ATE gives information about the average cost of drug ex-penditure, when firstly every physician is dispensing and secondly no one is. The ATT gives the reader information about the current dispensing regime compared to when no physician is dispensing. The objective of the empirical analysis is that the ATE and ATT must remain con-sistent, under given assumptions. In order to prove the consistency, Kaiser and Schmid use the doubly-robust regression. The outcome of this method is that consistency is attained firstly when the outcome model is legitimately specified and/or secondly the propensity model is legitimately specified. These models are used in order to substantiate the derived estimates.

In respect to the dataset, 1727 are non-dispensing and 1202 are dispensing doctors, totaling up to a panel of 7996 observations given the time period from 2008-2010. The statistics focus-es on a per patient output in order to facilitate the comparability between the two groups, due to higher frequency of patients at dispensing physicians. The descriptive statistics confirms that dispensing physicians compared with nondispensing physicians have greater drug expens-es, including for nondrug healthcare expenditures.

The study does indeed affirm that the dispensing practice (ATT) in the relevant cantons raises the drug expenditure per patient significantly by roughly 34 percent (CHF 95). Furthermore, total nondrug expenditure rises by around 22 percent per patient (110 CHF) . All results con-sidered, the analysis suggests that the financially determined dispensing structure affects the physicians’ prescribing manner, which ultimately influences healthcare spending. These results suggest that in the context of policy-induced healthcare expenditures, drug costs and nondrug costs are complementary. An explanation for this complementary relationship is that prescrib-ing additional medicine augments the consultation session with the patient by providing him extra information about the pharmaceutical and the physician fetching it, noting down the further treatment steps in the patients’ record, etc. The consultation will be remunerated with the time taken advising the patient. Another less likely reason, due to ethical aspects, the phy-sician may undertake additional treatments or tests in order to ‘justify’ the further prescription of pharmaceuticals.

2. Discussion and Relevance of the dispensing practice

The conclusions of the analysis illustrate the demonstrated issue for increasing health expendi-ture. Yet, the misconduct of dispensing physicians represents only a fraction of the actual in-efficiencies in the Swiss health system. However, this aspect is being described in more depth and also, the circumstances that may impede a conflict resolution.

2.1. Switzerland’s healthcare