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When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization

Leemore Dafny, Christopher Ody and Matt Schmitt

American Economic Journal: Economic Policy, 2017, vol. 9, issue 2, 91-123

Abstract: Branded pharmaceutical manufacturers frequently offer "copay coupons" that insulate consumers from cost-sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross-state and cross-consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending by $30 to $120 million per drug, or $700 million to $2.7 billion for our sample alone.

JEL-codes: G22 I13 L11 L65 M31 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/pol.20150588
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Working Paper: When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization (2016) Downloads
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