Moral Hazard in Drug Purchases

Jouko Verho and Jarkko Harju

No 10480, CESifo Working Paper Series from CESifo

Abstract: We study the moral hazard effects of the drug copayment threshold in Finland using detailed prescription drug purchase data. The analysis reveals that the average drug costs increase discontinuously by 17% at the threshold above which out-of-pocket drug costs decrease substantially. Our results suggest an average price elasticity of -0.17, which indicates evident moral hazard costs. Approximately 80% of the overall effect is due to individuals buying drugs in larger quantities rather than purchasing higher-priced drugs. The heterogeneity analysis suggests that the responses are largest for drug categories taken on an as-needed rather than a regular basis.

Keywords: prescription drugs; moral hazard; health insurance (search for similar items in EconPapers)
JEL-codes: D12 H51 I10 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-hea
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Working Paper: Moral Hazard in Drug Purchases (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10480

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