Supply of health care goods and services is different from other commodities because it is composed of MULTIPLE INPUTS.
• Cars need steel, rubber, wires and garments and uses labor to have an end product – a CAR• Health care goods and services are inputs that need to be combined with each other to produce an end product – BETTER HEALTH
For a sick person to be healthy, he needs theff inputs:• An expert advice from a physician/health personnel• Hospital/clinic facilities• Pharmaceuticals• Medical technology
• Manpower – MD, RN, RM, DMD, PT• Health infrastructure – Facilities needed to carry out the delivery of health services (clinics, hospitals, health centers)• Drugs – OTC, prescription, herbal drugs• Others – Other inputs which may be required to produce health like research and trainings.
Manpower• Highly-skilled manpower is the most important input in the supply of health services.• Often there is a trade-off between abundant supply and high quality manpower.• Physicians play a crucial role.• 80% of all spending are influenced by physicians’ decisions.
Role of physicians1. They recommend a particular course of action for their patients – Patient don’t have perfect knowledge of their conditions and would require the expertise of health professionals.2. Physicians while making crucial decisions for the patients, also participate in actual delivery of health services – Surgery – Giving immunizations – consultations
• Unlike other inputs, manpower takes a long time to produce.• It takes years to be a typical specialist physician practitioner in the Phil from high school onwards.
• Highly specialized manpower tend to self- regulate.• PRC• Different specialty organizations• Regulatory boards
• Specialist physician groups “auto-regulate”, meaning they regulate the production of themselves. This may be used to: – Assure the quality and skills of specialists – Distribute specialist manpower more effectively and efficiently (in different parts of the country) – “ward off” potential competitors in a certain geographic medical practice area.
Health Facilities• Hospitals, Clinics, Labs, Ambulatory Centers etc.• Supply of Hospital Services – Service Capacities – Geographic Distribution – Emphasis on Technology – Hospital Networking
Technology and Specialization• Technology improvement in diagnostics and therapeutics has improved the outcomes of medical intervention.• Specialization in specific areas and at all levels of hospital manpower has increased the accuracy of diagnoses and therapeutics• It also improved the outcomes of medical and surgical intervention
Hospital Capacity andGeographic Distribution• As of early 2000 – 1,942 hospitals (registered in Phil Hospital Association) – 90,766 beds – 80 million Filipinos – 1 hospital bed = 850 Filipinos
• The better the preventive and promotive health programs, the more likely it is that there will be less people seeking hospitalization• Demand side – Population and the effectiveness of the preventive and promotive health programs• Supply side – Depends on the capabilities of each and every hospital bed who depends on other input like adequacy and competence of medical manpower, medical technology, pharmaceuticals, among others
Pharmaceuticals (Branded and Generics) andother medical supplies• 10-12% of sales are generics and 88-90% are branded
Drugs as Other Inputs• Cost components: 1. Research and development • Most expensive • Cost of “inventing” or “innovating” new drugs • For a new drug to be introduced in the market, company takes $800 M in research and development • To recover a pharmaceutical firm’s R&D expenses, “patents” are awarded to drugs. • For 15 yrs, no one is allowed to produce and market a certain drug- monopoly • This gives the company the capability of pricing the drug high
• After the patent period expires, monopoly over the drug stops and the drug becomes “generic.” • This entitles others to produce and sell the same drug, allowing competition to set in. • This unpatented drug then becomes a cheap alternative.2. Drug manufacturing cost-raw materials, packaging3. Marketing cost4. Distribution cost
Supplier-Induced Demand• Physicians decides what a patient needs-is also the supplier of the product/service – Ex. A pediatrician during consultation, decides or recommends for a baby patient a vaccine which the pedia may also be supplying