Abstract
I examine whether the choice made by physicians concerning what drug version — trade-name or generic — to prescribe is subject to moral hazard. I use a data set containing information on exactly what drug and what version was prescribed at a particular patient visit to the physician.
The results indicate that physicians' habits and the tastes acquired by patients are important. However, costs also matter. Patients having to pay large sums out-of-pocket are less likely to have trade-name versions prescribed than patients getting most of their costs reimbursed. This indicates moral hazard.