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Tiered co-payments, pricing, and demand in reference price markets for pharmaceuticals.
- Source :
-
Journal of Health Economics . Dec2017, Vol. 56, p19-29. 11p. - Publication Year :
- 2017
-
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. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 01676296
- Volume :
- 56
- Database :
- Academic Search Index
- Journal :
- Journal of Health Economics
- Publication Type :
- Academic Journal
- Accession number :
- 126757084
- Full Text :
- https://doi.org/10.1016/j.jhealeco.2017.08.008