Fixed budgets as a cost containment measure for pharmaceuticals

In Västerbotten County, Sweden, there are two health centers which (in contrast to all other health centers in the region) bear strict responsibility over their pharmaceutical budget. This study examined whether the prices and quantities of pharmaceuticals prescribed by physicians working at these health centers differ significantly from those prescribed by physicians at health centers with open-ended budgets. Estimation results using matching methods, which allows us to compare similar patients at the different health centers, show that the introduction of fixed pharmaceutical budgets did not affect physicians' prescription behavior, indicating that fixed budgets may not be an efficient measure to reduce costs. Another explanation is that the health centers under study already had taken measures to contain costs, making it hard to further reduce costs.