Moral Hazards in Medication Prescribing

Simply put, in behavioral economics, a moral hazard is the intersection between consumer preference and constraints that limit the consumers’ ability to exercise that preference (typically money or time). Traditionally, moral hazards were less common in health care because medical treatment choices were made exclusively by physicians; however, the advent of pharmaceutical advertising, and mass medical information accessibility via the Internet, have shifted choices to patients, allowing for moral hazards, depending upon who is paying. (Peter Zweifel, 2000)

While diagnostic studies patients’ desire, payment identity, and availability may create moral hazards, medication prescribing also allows moral hazards because patients use them heavily (volume), they are often expensive (cost), and patients may pay nominally; however, physicians still usually make these choices initially, which is importantly followed by the patients’ choices to fill the prescription, or whether to adhere to the treatment.

Providers knowing the costs of medications is of little value in preventing moral hazards unless four prerequisites are met: (a) they were taught the importance of value; (b) believe it to be true; (c) inquire to their patients whether cost is an issue (e.g., are they paying); and, (d) whether the provider cares if insurance companies or the government overpays.  Because of information ubiquity regarding medication prices (e.g., patients and providers can know costs with a Siri search on Google in seconds), formulary structures and operating methods play little to no role in moral hazards with prescriptions.  They are primarily a function of providers’ and patients’ attitudes about the payers. (Michael A. Fischer, 2006)

Works Cited

Michael A. Fischer, J. A. (2006). Educating Trainees about the Cost of Medications. AMA Journal of Ethics, 142-146.

Peter Zweifel, W. M. (2000). Moral Hazards & Consumer Incentives in Health Care. In J. N. A.J. Culyer, Handbook of Health Economics, Volume 1 (pp. 409-455). Amsterdam: Elsevier Science B. V .