final econ flashcards
PBM
third-party administrator of prescription drug programs that negotiate prices with drug manufacturers and process claims for insurance companies. However, their tactics can hurt retail pharmacies.
Standing Order
Medical orders authorize healthcare providers to administer a medication or treatment without a specific prescription for an individual patient.
Non-patient specific order
apply to a population of patients without specifying an individual patient, such as a standing order for a vaccination clinic.
FDA (Food and Drug Administration)
protecting and promoting public health through the regulation and supervision of various products, including food, drugs, medical devices, and tobacco products.
Narcan
brand name for naloxone, a medication used to rapidly reverse opioid overdose
Behind the Counter Products
Behind-the-counter products that are only available through pharmacy intervention. These products are not typically located in the OTC aisles, and pharmacists have the authority to dispense them.
Examples of BTC
Examples of BTC products include poxvirus vaccine (Poxvirion) and naloxone (Narcan). or Plan B
Pharmacist authority
Pharmacists in different states have different levels of authority when it comes to dispensing medications, including BTC products. It’s important for pharmacists to be familiar with their state’s laws and regulations.
Over the Counter drugs
Over-the-counter products are medications that are available for purchase without a prescription. However, they are typically paid for by the customer and are not subject to insurance or other reimbursement programs.
Reasons for limits on the prescription drug market
Patents, cost development, externialities, heavily regulated products, etc.
Patents:
Patents limit generic availability and create natural monopolies, which does not follow the law of economics.
Cost development
Research and development for drugs can cost billions of dollars.
Externalities
Adverse drug reactions (ADRs) and adverse drug events (ADEs) can have negative consequences.
Regulation
The New Drug Application (NDA) process and post-marketing surveillance heavily regulate pharmaceutical products.
Necessities:
Consumers are not the primary decision-makers when it comes to purchasing drugs, which can reduce price sensitivity or elasticity.
Competition
The pharmaceutical market is not perfectly competitive.
Security
Healthcare is considered a security and necessity.
Solvaldi
Solvaldi is a medication used to treat hepatitis C. Most health plans cover it if you have insurance, but it can be expensive at around $84,000 for a full course of treatment. Despite its cost, Solvaldi can be life-saving for those with hepatitis C.
NDA
A review process mandated by the FDA evaluates the safety and efficacy of new pharmaceutical products before they can be approved for sale in the United States.
Post-marketing surveillance
After a drug is approved and made available to the public, post-marketing surveillance requirements require manufacturers to continue monitoring its safety and efficacy to ensure that any potential adverse reactions or risks are identified and addressed promptly.
Bad monopolies
Bad monopolies are illegal and involve a single company ruling a market with little or no competition.
Natural monopolies
Natural monopolies are not necessarily illegal, but they can restrict competition and access to a market. For example, efficient markets like shampoo and milk have multiple brands and manufacturers, while the pharmaceutical market may have only a few companies producing a particular drug due to the high cost of research and development.
Federal Reserve Interest Rates
The Federal Reserve raised interest rates by 5% from a year ago. Changes in interest rates can impact the economy, including affecting borrowing and lending rates for consumers and businesses.
Consumer Price Index
The Consumer Price Index (CPI) is a measure that tracks the changes in prices of a basket of goods and services consumed by households over time. It is a widely used indicator of inflation, and it is often used by governments and central banks to guide monetary policy. The CPI is calculated by selecting a base year and a basket of goods and services that represents the consumption patterns of households. The prices of these goods and services are then tracked over time, and the percentage change in the overall price level is calculated. The CPI is often used to adjust wages, salaries, and other payments for inflation.
Market basket
A market basket is a collection of goods and services used to represent the typical consumption patterns of a certain population. The items in the basket are used to calculate the CPI and reflect the average prices of goods and services over time.
Inflation
Inflation is the rate at which the prices of goods and services increase over time. When inflation is high, the purchasing power of a currency decreases, meaning that the same amount of money will buy fewer goods and services than before. Changes in interest rates and government policies can impact inflation rates.
CHAPTER 3
Law of Demand
The Law of Demand is an economic principle that states that as the price of a good or service increases, the quantity demanded for that good or service will decrease, and vice versa. This principle assumes that everything else is held constant, such as consumer preferences, income, and the price of other goods.
Quantity Demanded
Quantity demanded refers to the amount of a good or service that consumers are willing and able to buy at a particular price point, within a given time period.
Ceteris Paribus
Ceteris Paribus is an economic principle that means “all other things being equal.” It describes a situation where only one variable changes, while all other variables are held constant.
In the context of the Law of Demand, it means assuming that nothing changes except for the price and the quantity demanded.
Law of Supply
The Law of Supply is an economic principle that states that as the price of a good or service increases, the quantity supplied for that good or service will increase, and vice versa. This principle also assumes that everything else is held constant, such as the cost of production, technology, and government policies.
Quantity Supplied
Quantity supplied refers to the amount of a good or service that producers are willing and able to sell at a particular price point, within a given time period.
Equilibrium Price
Equilibrium price is the market price where the quantity demanded by consumers equals the quantity supplied by producers. At this price, the market is in balance, and there is no excess supply or demand.
Price Floor
A price floor is a government-mandated minimum price that is set above the equilibrium price. This results in excess supply and can lead to surpluses and waste.
Price Ceiling
A price ceiling is a government-mandated maximum price that is set below the equilibrium price. This results in excess demand and can lead to shortages and rationing.
Shifts in Supply and Demand
Shifts in supply and demand occur when there is a change in a non-price determinant of either supply or demand. Examples include changes in consumer preferences, income, technology, and government policies. These shifts can result in changes in both the equilibrium price and quantity.
Qualities of Law of Demand
As the price of a product increases, the quantity demanded decreases, and vice versa.
Qualities of Law of Demand
Opportunity costs and limited income are reasons for the Law of Demand
Opportunity Costs
Opportunity cost is the value of the next best alternative foregone when making a choice. When the price of a good or service is higher, it means that a consumer has to pay more to obtain it. As a result, the opportunity cost of consuming that good or service increases because the consumer has to give up more of their resources (such as money) to obtain it. This can lead to a decrease in the quantity demanded of that good or service.
On the other hand, when the price of a good or service is lower, the opportunity cost of consuming it decreases, making it more affordable for consumers. As a result, consumers may be more willing to buy more of that good or service, leading to a higher quantity demanded.
Therefore, higher price and lower quantity demanded implies a higher opportunity cost, while lower price and higher quantity demanded implies a lower opportunity cost.
Law of Supply Qualities
As the price of a product increases, the quantity supplied increases, and vice versa.
This statement describes the law of supply, which states that there is a positive relationship between price and quantity supplied. As the price of a product increases, suppliers are willing and able to produce more of it because it becomes more profitable, and vice versa.
Law of supply qualities
Changes in price cause movements along the supply and demand curve.
Law of supply qualities
Movement is a change in quantity demanded when all other factors are held constant.
This means that a movement along the demand or supply curve occurs when the price changes and all other factors, such as consumer income or technology, remain constant. For example, if the price of a product increases, the quantity demanded will decrease along the same demand curve, assuming that all other factors remain the same.
Shift is a change in demand or supply factors when ceteris paribus is no longer valid:
A shift in the demand or supply curve occurs when a change in a non-price factor affects either the quantity demanded or supplied. This is called a shift because the entire curve moves to a new position, representing a different relationship between price and quantity. A shift in the demand curve, for example, can be caused by changes in consumer tastes or income, while a shift in the supply curve can be caused by changes in technology or production costs.
Movement of the supply and demand curve
In the context of supply and demand curves is that a movement is a change in the quantity demanded or supplied of a good in response to a change in its price, while all other factors remain constant (ceteris paribus)
Shift in demand curve
a shift refers to a change in the demand or supply of a good due to a change in one or more factors that affect demand or supply, such as changes in consumer tastes, technology, or production costs. A shift causes the entire demand or supply curve to shift to the left or right, indicating a change in the quantity demanded or supplied at every price level.
Supply & Price
As the price of a product increases, there is more willingness to make more things because it is more profitable to do so, thus supply increases. Revenue is calculated by multiplying the selling price (P) by the quantity or volume (Q), and increasing the quantity or volume will increase revenues.
Profit
Revenues - expenses
Recessions
In a recession, output drops and people tend to spend less, so demand is affected, and it shifts to the left. The shift is mostly due to changes in income.
U.S. Autoworkers Strike
A strike by autoworkers reduces the supply of labor, which impacts production negatively, and the supply curve shifts to the left.
Imported Goods:
If imported goods become more expensive, people tend to buy less of them and more domestic goods, so the demand curve for domestic goods shifts to the right. The shift is due to the availability of substitutable goods.
Gasoline Prices:
When the price of gasoline increases, demand decreases because it becomes more expensive to buy, and the demand curve shifts to the left. The shift is due to the fact that gasoline is a complementary good.
Market demand curve:
A graphical representation of the quantity of a product that all consumers in the market are willing to buy at different prices. It is the sum of all individual demand curves for a product.
Equilibrium point:
The point where the quantity demanded equals the quantity supplied, resulting in a stable market price. It is affected by determinants and factors of supply and demand.
Disequilibrium
A market condition where quantity demanded does not equal quantity supplied, resulting in an unstable market price. It can be caused by market forces and shifts, and may require interventions like price ceilings or floors.
Substitutable goods:
Products that can be used as alternatives for one another. When the price of one product increases, demand for the other product increases.
Complementary goods
Products that are used together. When the price of one product increases, demand for the other product decreases.
Factors affecting supply and demand
Changes in factors like income, preferences, technology, input costs, and government policies can shift the supply and demand curves, leading to changes in the equilibrium price and quantity.
What shapes profits?
Lower costs
Higher revenues
Higher utility
What is utility?
Utility is a measure of pleasure, satisfaction, and happiness, well-being, and is a social function. It is defined as a Quality of Life (QOL) measure.
QOL
QOL is a humanistic measure in healthcare or outcome, which focuses on the patient’s well-being and satisfaction with their life.
What is HRQOL?
HRQOL stands for Health-Related Quality of Life and is a refined measure of QOL that exclusively focuses on the patient’s health-related well-being and values.
What are the three types of outcomes in healthcare monitoring?
Economic (measured in units of money)
Clinical (objective outcomes related to natural, medical, biological, and physiological factors)
Humanistic (utility-based outcomes focused on QOL
Hospice
A type of healthcare that focuses on providing palliative care to terminally ill patients, with the goal of optimizing quality of life and reducing suffering.
Palliative Care
A type of healthcare that focuses on improving the quality of life of patients with serious illnesses or conditions, by addressing physical, emotional, and spiritual needs.
Curative Care
type of healthcare that focuses on treating acute medical problems with the goal of achieving a cure.
Marginal
The additional satisfaction or benefit gained from consuming one additional unit of a good or service.
Example: A consumer may experience diminishing marginal utility, meaning that the additional satisfaction gained from each additional unit consumed decreases over time.
Equilibrium Price:
the price point at which the quantity demanded and the quantity supplied of a product are equal, resulting in no shortage or surplus of the product in the market.
Price Discovery
The process of determining the actual price point for a product based on the interaction between buyers and sellers in the market.
Markability
The concept of laissez-faire, where market forces of supply and demand determine the price and quantity of a product.
Government-Induced Movements and Shifts:
The changes in market equilibrium caused by government interventions such as price floors and price ceilings, which can result in either shortages or surpluses of the product in the market.
Long term care
which includes medical, social, and custodial care services for individuals who need assistance with daily activities.
Medical care in LTC refers to services provided by healthcare professionals, such as nursing care, medication management, therapy, and other medical treatments.
Rx inelasticity of demand
the quantity demanded of a product is not very responsive to changes in its price. In the case of prescription drugs, the demand is often considered inelastic because people need the medication regardless of its price. This means that a change in the price of prescription drugs will have a relatively small effect on the quantity demanded. The price elasticity of demand for prescription drugs is typically less than 1, meaning that a 1% increase in price results in less than a 1% decrease in quantity demanded, making it relatively insensitive to price changes.
Equation for profit calculation
Revenue - costs = profits
DTC advertising
DTC advertising is advertising for prescription drugs that is legal in only a few countries, including the United States and New Zealand. Its purpose is to create demand for products and increase revenue.
GDP
We want to increase GDP
the total value of goods and services produced in a country
Current unemploymnet rate:
unemployment at 3.5%
Current GDP
currently at $4 billion
Seasonal unemployment:
summer jobs for high school students, fewer construction jobs in winter
Labor force:
: those aged 16 and over who are actively looking for a job
Frictional unemployment
caused by geographic changes, such as moving from one part of the country to another
Structural unemployment
caused by a lack of necessary skills
ex: student not getting a pharm tech because they don’t have a license
Cyclical unemployment:
caused by changes in the economy, such as during times of growth or recession
Direct Costs:
: money paid for healthcare services (e.g. paying for a medical procedure)
indirect Costs:
resources and expenses that are not directly related to healthcare (e.g. paying for custodial services for someone in long-term care)
Intangible Costs:
costs that are difficult to quantify or measure, such as pain, suffering, or emotional distress
Cost Minimization Analysis (CMA)
measures costs only, with no consideration of consequences or outcomes
Cost-Effectiveness Analysis (CEA)
measures consequences in natural units, calculates a cost-effectiveness (C/E) ratio, and seeks to identify the lowest C/E ratio
Cost-Utility Analysis (CUA):
measures consequences in monetary units, calculates a benefit-cost (B/C) ratio, and seeks to identify the highest B/C ratio
Cost-Benefit Analysis (CBA)
measures consequences in humanistic (utility) units, calculates a cost-utility (C/U) ratio, and seeks to identify the lowest C/U ratio.
