Experts' agency problems: evidence from the prescription drug market in Japan

Rand J Econ. Autumn 2007;38(3):844-62. doi: 10.1111/j.0741-6261.2007.00115.x.


This article examined the physician-patient agency relationship in the context of the prescription drug market in Japan. In this market, physicians often both prescribe and dispense drugs and can pocket profits in so doing. A concern is that, due to the incentive created by the mark-up, physicians' prescription decisions may be distorted. Empirical results using anti-hypertensive drugs suggest that physicians' prescription choices are influenced by the mark-up. However, physicians are also sensitive to the patient's out-of-pocket costs. Overall, although the mark-up affects prescription choices, physicians appear more responsive to the patient's out-of-pocket costs than their own profits from mark-up.

MeSH terms

  • Antihypertensive Agents / economics
  • Conflict of Interest / economics*
  • Costs and Cost Analysis / economics
  • Drug Costs*
  • Drug Industry / economics*
  • Drug Prescriptions / economics*
  • Drug Utilization
  • Economics, Pharmaceutical*
  • Health Care Sector*
  • Humans
  • Insurance, Pharmaceutical Services
  • Japan
  • Models, Economic
  • Physician-Patient Relations
  • Practice Patterns, Physicians' / economics*
  • Prescription Fees


  • Antihypertensive Agents