LAUSR

The German market for innovative medicines is characterized by simultaneous underuse and overuse. In order to address these deficits and improve decision making by physicians, the German parliament recently passed a law which mandates implementing reimbursement decisions on innovative medicines in the prescription software for physicians. This article discusses the political process leading to the law as well as its rationale in view of economic theory. Based on the considerably larger extent of underuse than overuse of innovative medicines in Germany this article predicts that the law will lead to an increase in sales by the pharmaceutical industry. It argues that legislation to increase prescription rates through information technology is questionable in a market where competitive forces should prevail. The correct approach, in line with economic theory, is either to improve information availability for patients or change existing regulation in the case of government failure. The latter may include revoking penalties for physician prescriptions and imposing prescription exclusions.