Details
| Original language | English |
|---|---|
| Pages (from-to) | 19-29 |
| Number of pages | 11 |
| Journal | Journal of health economics |
| Volume | 56 |
| Early online date | 15 Sept 2017 |
| Publication status | Published - Dec 2017 |
| Externally published | Yes |
Abstract
Health insurance companies curb price-insensitive behavior and the moral hazard of insureds by means of cost-sharing, such as tiered co-payments or reference pricing in drug markets. This paper evaluates the effect of price limits – below which drugs are exempt from co-payments – on prices and on demand. First, using a difference-in-differences estimation strategy, we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand-name drugs in the German reference price market. Second, estimating a nested-logit demand model, we show that consumers appreciate co-payment exempt drugs and calculate lower price elasticities for brand-name drugs than for generics. This explains the different price responses of brand-name and generic drugs and shows that price-related co-payment tiers are an effective tool to steer demand to low-priced drugs.
Keywords
- Co-payments, Cost-sharing, Demand model, Drug prices, Firm behavior, Health insurance, Price elasticity, Reference pricing, Regulation
ASJC Scopus subject areas
- Medicine(all)
- Health Policy
- Medicine(all)
- Public Health, Environmental and Occupational Health
Sustainable Development Goals
Cite this
- Standard
- Harvard
- Apa
- Vancouver
- BibTeX
- RIS
In: Journal of health economics, Vol. 56, 12.2017, p. 19-29.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Tiered co-payments, pricing, and demand in reference price markets for pharmaceuticals
AU - Herr, Annika
AU - Suppliet, Moritz
N1 - Funding Information: We would like to thank two anonymous referees, the editor Martin Chalkley, Tomaso Duso, Christopher J. Garmon, Germain Gaudin, Tobias Klein, Jonathan Kolstad, Karine Lamiraud, Martin Salm, Hendrik Schmitz, Pravin K. Trivedi, and Tobias Wenzel for helpful comments and suggestions. We thank the participants of numerous seminars and conferences for their valuable input. This research was supported by the DFG (grant HE 6825/2-1 ) and the SFF (Heinrich Heine University).
PY - 2017/12
Y1 - 2017/12
N2 - Health insurance companies curb price-insensitive behavior and the moral hazard of insureds by means of cost-sharing, such as tiered co-payments or reference pricing in drug markets. This paper evaluates the effect of price limits – below which drugs are exempt from co-payments – on prices and on demand. First, using a difference-in-differences estimation strategy, we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand-name drugs in the German reference price market. Second, estimating a nested-logit demand model, we show that consumers appreciate co-payment exempt drugs and calculate lower price elasticities for brand-name drugs than for generics. This explains the different price responses of brand-name and generic drugs and shows that price-related co-payment tiers are an effective tool to steer demand to low-priced drugs.
AB - Health insurance companies curb price-insensitive behavior and the moral hazard of insureds by means of cost-sharing, such as tiered co-payments or reference pricing in drug markets. This paper evaluates the effect of price limits – below which drugs are exempt from co-payments – on prices and on demand. First, using a difference-in-differences estimation strategy, we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand-name drugs in the German reference price market. Second, estimating a nested-logit demand model, we show that consumers appreciate co-payment exempt drugs and calculate lower price elasticities for brand-name drugs than for generics. This explains the different price responses of brand-name and generic drugs and shows that price-related co-payment tiers are an effective tool to steer demand to low-priced drugs.
KW - Co-payments
KW - Cost-sharing
KW - Demand model
KW - Drug prices
KW - Firm behavior
KW - Health insurance
KW - Price elasticity
KW - Reference pricing
KW - Regulation
UR - http://www.scopus.com/inward/record.url?scp=85030114148&partnerID=8YFLogxK
U2 - 10.1016/j.jhealeco.2017.08.008
DO - 10.1016/j.jhealeco.2017.08.008
M3 - Article
C2 - 28964941
AN - SCOPUS:85030114148
VL - 56
SP - 19
EP - 29
JO - Journal of health economics
JF - Journal of health economics
SN - 0167-6296
ER -