The Impact of the Self-medication Taxation System on Drug Cost Control

Self-medication in the form of self-care of our health is popular in many countries. To help promote self-medication and ultimately aim to contain medical expenditure, Japan introduced taxation system in 2017. At the time of its enactment, self-medication taxation system was a five-years temporary law, but it was later extended towards 2026. It is assumed that this decision reflects expectations for drug cost control. However, it is not clear whether self-medication taxation system has reduced drug costs, as pointed out by the expert committee of Japanese government. This paper examines an impact of the self-medication taxation system on drug costs control, using receipt data. Our analysis on the allergic rhinitis drug market indicates that the self-medication tax would reduce the frequency of patients, but increase the volume of prescriptions per visit. Based on these results, a simulation is conducted to determine the market structure in a counterfactual situation where there is no self-medication taxation system. As a result of changes in physician prescribing behavior, drug cost increases by 1.5%. However, including the effect of a decrease in the frequency of patient visits, our results indicates that drug expenditure is reduced by 0.26%, through the self-medication tax system.