Physician Dispensing and Drug Expenditures: Empirical Evidence from the NHS

Olivia Bodnar¹ (with Hugh Gravelle², Nils Gutacker², and Annika Herr¹)

1 Duesseldorf Institute for Competition Economics (DICE)

2 Centre for Health Economics, University of York (CHE)


While most OECD countries fully prohibit physician dispensing, there are some exceptions as, for example, in Japan, Switzerland, and the UK and lately also politically discussed in Germany. On the one hand, dispensing physicians may be incentivized to increase their profits through overprescribing or cost-inefficient prescribing. On the other hand, wholesale margins are higher for more competitive markets which could lead to a positive association between physician dispensing and the use of generic drugs. We evaluate drug dispensing by physicians in the National Health Service (NHS) in England between 2012 and 2017. We estimate average treatment effects (ATE), as well as marginal treatment effects (MTE) in order to identify a continuum of treatment effects along the distribution of individual unobserved characteristics that drive the treatment decision. We use quarterly prescription data from all general practitioners in the NHS from January 2012 to December 2017. Our first estimates suggest that drug dispensing increases expenditures per patient by 15,68 pounds sterling per year. This effect is mainly driven by an increase in the number of prescribed items. Furthermore, we observe substitution to smaller package sizes due to a fixed-fee payment for each dispensed item.