Supply and demand: are doctors manipulating the medical market?

Any market – be it housing, retail, or even health – is dictated to a degree by supply and demand. It is commonly accepted that suppliers will attempt to influence our demand for products. This is most readily seen in advertising and marketing campaigns, but demand for a product can also be influenced by a person’s expectations, the price or even the weather.


In this regard, when medicine meets market forces, interesting ethical questions are exposed. Can the medical community alter demand for products and services without breaching ethical imperatives to reduce harm?

It is in this context that the term supplier-induced demand is used to describe situations where a healthcare provider increases the consumption of a medical product or service beyond what a patient would typically consume if they shared equal understanding with their physician. For example, referring a patient for an out-of-pocket MRI in circumstances where such imaging is medically unwarranted.

Such behaviour is discordant with beneficence, one of the four pillars of medical ethics which dictates that physicians should always act to maximise the wellbeing of their patients. Disingenuously increasing demand for health services in many cases also increases patient costs and often conveys an elevated risk of harm. Increasing demand in such circumstances, therefore, necessitates a breach of physicians’ ethical obligation to act in their patients’ best interests.

Illustrating this point is a recent study which compared the rate of caesarean births between two Indian states with comparable health statistics. The study revealed a stark difference in delivery methods.

In the state of Madhya Pradesh, obstetricians were remunerated per birth, with reimbursements of 800 INR ($15) for vaginal births compared to 4530 INR ($90) for caesarean births. Over a four-year period in this state, caesarean rates increased from 26.6% to 40.7% of all births.

By comparison, a reimbursement scheme in the state of Gujarat paid obstetricians a fixed rate, regardless of delivery technique. Over the study period, the caesarean rate in Gujarat decreased from 6% to 4.3%.


These results allowed the authors to deduce that the remuneration scheme in Madhya Pradesh created a strong incentive for obstetricians to perform caesareans. Given that under healthy circumstances a vaginal birth is a safer option than a caesarean, this study suggests that a breach of beneficence may have occurred.

And yet, not all cases of supplier-induced demand are a product of physicians pursuing personal profit. In many cases it is patient attitudes that drive such behaviour. Under today’s model of patient-centred care, patients are better informed about available diagnostic options, and often request more tests than necessary, vying for certainty over clinical judgement.

Similarly, physician fears of malpractice litigation induce a higher degree of superfluous tests and referrals – a phenomenon known as ‘defensive medicine’. This phenomenon explains increasing diagnostic testing through a perceived necessity on the physician’s part to avert legal prosecution for misdiagnosis.

Indeed, the professional and personal consequences of under-treatment are invariably much greater than over-treatment. In this regard, it is unsurprising that studies have shown that defensive medicine has increased doctors’ recommendations for various services, including caesarean sections, radiology, and referrals.

Taking this into consideration, is it perhaps justifiable for doctors to inflate demand?

The Victorian Government’s ‘No Jab No Pay’ initiative is an example of supplier-induced demand in the public health sector. Under this scheme, parents of unvaccinated children are ineligible for an array of family assistance payments. A loss of government benefits to parents of children who have not received timely vaccinations drives a publicly beneficial demand for vaccination.


The central ethical consideration here is defining in what circumstances we may permit alterations in a patient’s demand for healthcare.

Medicine is a unique market, which doesn’t necessarily follow the general principles of more traditional economic markets. There is an inherent asymmetry of information between doctors and patients resulting in patients being reliant upon clinicians to inform their decision-making.

Unlike more predictable purchases, patients often cannot accurately foresee the outcomes of their healthcare decisions. That is, most day-to-day purchases tend to have many more perceptible consequences compared to the complexities of medical care.

It is therefore vital that physicians and public health workers respect a patient’s right to autonomy – where multiple treatments are available a patient should be fully informed of all possible options. Only under extenuating circumstances can we permit a breach of this right.

However, when physicians disingenuously lead patients into making healthcare choices they otherwise would not – and especially when this increases risks to the patient – they are riding roughshod over their patient’s rights whilst simultaneously disregarding the principle of beneficence.

Ultimately, physicians exert significant influence over their patients’ decision-making. In many cases, a conflict of interest arises between a doctor’s motives and the patient’s best interests. We must be wary of any manipulations of the medical market where and when they arise. Failing to do so not only increases burden on patients and the healthcare system more broadly, but also defies the ethical obligations that govern clinicians’ practice.

The views and opinions expressed in this article are those of the author and do not necessarily represent those of the Doctus Project.