On Utilization and Stockpiling of Prescription Drugs when Co-payments Increase: Heterogeneity across Types of Drugs

Niels Skipper ()
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Niels Skipper: School of Economics and Management, Aarhus University, Denmark, Postal: 8000 Aarhus C, Denmark

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper investigates prescription drug utilization changes following an exogenous shift in consumer co-payment caused by a reform in the Danish subsidy scheme for the general public. Two different types of medication are considered – insulin for treatment of the chronic condition diabetes and penicillin for treatment of non-chronic conditions. Using purchasing records for a 20% random sample of the Danish population, I show that increasing co-payments lower the utilization of both drugs. I demonstrate that individuals treated with drugs for chronic conditions react to the policy change by stockpiling on their medications. This has implications for other papers in the literature that use variation in subsidy rates over time to estimate the price elasticity of demand. This is not the case for penicillin however, where price elasticities are estimated to be in the -.18 – -.35 range. Further, I find that the lower part of the income distribution is more price responsive.

Keywords: Prescription drugs; co-payments; price elasticities; stockpiling (search for similar items in EconPapers)
JEL-codes: I11 I18 (search for similar items in EconPapers)
Pages: 44
Date: 2010-07-23
New Economics Papers: this item is included in nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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