The Demand for OTC Medicines: Some Australian Evidence

Abstract

One of the major social goals of the government in any country is the provision of adequate health care for all its residents. This is certainly the case in Australia where total health expenditure as a proportion of gross domestic product (GDP) has risen since the early 1970s to its current level of over 7%. Well over half of this health expenditure comes from the public purse upon which increasing demands are being made. One potential means of reducing this pressure in the health area is a greater reliance on self health care which includes the use of OTC medicines. The present paper examines the economics of self health care through the specification of an economic model of the demand for self care and the empirical testing of this model using Australian data. The model is then used to calculate the consumer surplus in the market for OTC medicines as a measure of part of the benefits of self medication in the Australian health care system.