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Financial incentives and prescribing behavior in primary care

That is the title of a paper by Bodnar et al. 2023. A summary of this interesting paper is below.

Overview of general practitioners in the UK

Under the English National Health Service (NHS) program,

…patients register with a single general practice that acts as the gatekeeper to most other NHS services, including non-emergency hospital care. Almost all general practices are small businesses owned and run by partnerships of GPs who share profits and losses…

The English NHS is funded almost entirely by taxation. There is a small patient charge (£8.80 in 2018/19) when a primary care prescription is dispensed, be it by a pharmacy or an on-site GP dispensary. Around half of the population are exempt from this charge on grounds of age (under 16, in full time education and under 18, or over 60), current or recent pregnancy, specified medical conditions, and low income…As a result, approximately 90% of prescriptions are dispensed without charge…The prescription charges that dispensing practices collect on non-exempt prescriptions are not retained by the practice.

GP drug dispensing

Most patients who receive a drug prescription from their GP must take it to a community pharmacy in contract with the NHS to have it dispensed. Patients who would have serious difficulty in accessing a pharmacy or who live in an area which has been designated as rural in character and who are more than 1 mile (1.6 km) away from a pharmacy, can ask their general practice to dispense drugs to them.4 The practice decision on whether to dispense is all or nothing: if it agrees to dispense to one eligible patient it must dispense to all eligible patients who request it.


The authors use 2011-2018 quarterly administrative data on GP practices quarterly panel of GP practices and identify drugs dispensed using 15-digit British National Formulary (BNF) codes. The authors compare how practice characteristics impact whether it decides to be a dispensing practice. The authors also use an entropy balancing approach based on the Hainmueller (2012) paper as implemented in Stata (see Hainmueller and Xu 2013). Entropy balancing “…relies on a maximum entropy reweighting scheme that calibrates unit weights so that the reweighted treatment and control group satisfy a potentially large set of prespecified balance conditions that incorporate information about known sample moments. Entropy balancing thereby exactly adjusts inequalities in representation with respect to the first, second, and possibly higher moments of the covariate distributions. ” OLS and 2SLS (using rural status as the instrument) are also considered.


Using this approach, the authors find that:

…physician dispensing increases drug costs per patient by 3.1%, due to more, and more expensive, drugs being prescribed. Reimbursement is partly based on a fixed fee per package dispensed and we find that dispensing practices prescribe smaller packages. As the proportion of the practice population for whom they can dispense increases, dispensing practices behave more like non-dispensing practices.

You can read the full paper here.