Factors Influencing Pharmaceutical Demand in Iran: Results from a Regression Study

Background and Objectives: Pharmaceutical expenditures are responsible for a major part of health systems’ cost. According to the WHO’s statistics, Iran is the first among the 20 countries in the world in terms of drug consumption. The first step in controlling consumption of a particular good is to identify factor inducing the relevant demands. Hence, this study aimed to identify the pattern and demand-inducing factors of drug consumption in Iran.   Methods: The time series data of pharmaceutical expenditures was acquired from the yearbooks of Iranian Ministry of Health and Medical Educations. The time series data of medicine price index and per capita income were obtained from the documentation of the Central Bank of Iran. Pharmaceutical demand was modeled as a function of economic variables using the logarithmic transformation of Cobb-Douglas demand function and regression coefficients were estimated.   Findings: Households income and medical liability insurance and medicine prices showed a positive and a negative impact on medicine expenditures, respectively. The elasticity of price and income was found to be less than one suggesting medicine as an inelastic and normal good.   Conclusions: Our results imply that policies such as enhancing financial resources of insurances, rationalizing the allocated expenditures, and appropriate packaging of the insured medicines based on elasticity of income and demand, providing insurance premium based on the type and rank of the disease, implementation of coinsurance according to the type of medicinal services would help control of drug consumption.