In this paper, we describe the Dutch pharmaceutical market, which is heavily regulated by the government. Through the regulation of prices and promoting prudent use, the Dutch government tries to bring down the cost of pharmaceuticals, which increases every year at a higher rate than total health care expenditure. The complex system of regulation, especially aimed at cost containment, is not very effective, particularly with respect to controlling outpatient pharmaceutical expenditure. Moreover, the system has few incentives towards efficiency. Though the market share of generic pharmaceuticals is rapidly growing, pharmaceutical expenditure has not decreased accordingly. The discounts offered by wholesalers of generic products to pharmacists produce private rather than societal gains from generic prescriptions. Dismantling the current regulatory system, boosting competition and efficiency with insurers in a leading role, seems to be the way forward.
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