 Tiered co-payments, pricing, and demand in reference price markets for pharmaceuticalsAnnika Herr and Moritz Suppliet Journal of Health Economics, 2017, vol. 56, issue C, 19-29 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: Drug prices; Cost-sharing; Co-payments; Reference pricing; Regulation; Firm behavior; Health insurance; Demand model; Price elasticity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:56:y:2017:i:c:p:19-29 DOI: 10.1016/j.jhealeco.2017.08.008 Access Statistics for this article Journal of Health Economics is currently edited by J. P. Newhouse, A. J. Culyer, R. Frank, K. Claxton and T. McGuire More articles in Journal of Health Economics from Elsevier |
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