Today I have had a chance to visit my doctor to ask for some meds; I carry a mild skin disease which I have lived with throughout my life. I am usually OK with it but sometimes it bothers me especially in extreme weathers like this time of the year in Tokyo, which is too warm (over 90F).
Got my script and went to the pharmacy. Pharmacist asks "which do you prefer, the branded or the generic?" I was a bit surprised and said, "either is fine." I wanted to see what will happen when I gave them the choice with no opinion expressed from my end.
What happened, they gave me the branded drug, slightly expensive than the generic, but still no big deal (it's an old anti-fungal cream). For those who are not familiar with Japanese regulations, the physician still has the authority to prescribe the branded over the generic, but most of the time it could be switched at the pharmacy level. And there is an incentive system to the pharmacist which they receive some benefit when the percentage of the generic drug they dispense within all drugs is above a certain level. This rule is coming from the expectation that this will save the National Health Insurance system with some money when the patients will switch to a pharmacologically equivalent but a cheaper alternative.
In fact that is not what is happening here. There is an easy loophole for the pharmacy that makes it seem that it will never work in favor of the NHI system. Once you set a threshold, pharmacies will do their best to reach it but not any further. That's why I got the branded. They already know that they can clear the hurdle (or maybe they know that they can never clear it) and beyond that it will make sense for them to dispense a more expensive alternative which associates with a larger absolute margin.
Enforcement has never been easy, but I am not sure if only by crafting an incentive system will become a solution to this kind or problem. There needs to be at least a pinch of conscience or a sense of occupational obligation to make this work, otherwise people would just become relentless and endlessly pursue those loopholes. And, of course, there is no perfect system that can fully control everybody's behavior.
There are abundant examples for this kind of morale hazard. For example, I never vote. At a conceptual level, I do wish that all people go and vote, or exercise their suffrage, to choose whichever party or candidate they want to, because that's how a health democracy works. A nation will have to operate in the interest of its participants, not in somebody's. I will advice my friends if they ask me whether they should go vote or not, you should just go. That's because I know that a healthier democratic system will benefit me.
On the other hand, I never vote because of two reasons, one is that voting results are external to me, that is, I can never get to control the outcomes. The other is, voting associates a huge opportunity cost which I feel it is not worth doing so. Altogether, I am too busy to use time for things I cannot control. And as far as I can think through in my unbiased mind, at least this economic situation is the same for the majority of the people in Japan. So if you are an rational player in a democratic game, the contradictory conclusion driven by an economical thought process is that nobody should ever vote.
But interestingly, people still go vote. Why is that? My opinion, people are bound with those mental models that they have the obligation to vote, which in fact is not true at all. You will never be punished by not voting. And that is also one manifestation of democracy, the freedom not to vote is there.
Further more, why voting is not an obligation is because people didn't choose to born in their respective country. What am I talking about? If God asked you, prior to your birth, through which country you would like to come into the world, giving you enough information including tax rates, macro economic indicators and how well women's rights are protected, and you made a conscious decision to choose your nationality given full information to understand the trade offs, then you are logically obliged to pay tax, respect woman (or not depending on your choice) and go voting. Once again, that's because you opted to do so.
But going back to the original point, people are biased towards voting, which is an interesting observation if you will. This means, you
can try to control people to behave irrationally. Then why cannot we make physicians and pharmacists work in favor of the public and not in their self interest? I think the key to this is education and training. Educate the physicians and pharmacists that they will develop a mental model that prescribing a branded drug above the generic is a sinful betrayal against the community which invested in you without even knowing that you will be a great physician or pharmacist. This can be a great solution which may not happen in instantaneously but still is affordable approach.