Estimating price elasticities of demand for pain relief drugs: evidence from Medicare Part D

Aparna Soni ()
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Aparna Soni: Indiana University-Indianapolis

International Journal of Health Economics and Management, 2024, vol. 24, issue 4, No 1, 515 pages

Abstract: Abstract Overdose deaths from prescription opioids remain elevated, and policymakers seek solutions to curb opioid misuse. Recent proposals call for price-based solutions, such as opioid taxes and removal of opioids from insurance formularies. However, there is limited evidence on how opioid consumption responds to price stimuli. This study addresses that gap by estimating the effects of prices on the utilization of opioids, as well as other prescription painkillers. I use nationally representative individual-level data on prescription drug purchases and exploit the introduction of Medicare Part D in 2006 as an exogenous change in out-of-pocket drug prices. I find that new users have a relatively high price elasticity of demand for prescription opioids, and that consumers treat over-the-counter painkillers as substitutes for prescription painkillers. My results suggest that increasing out-of-pocket prices of opioids, through formulary design or taxes, may be effective in reducing new opioid use.

Keywords: Health insurance; Pain relief; Opioids; Medicare Part D; Elasticity (search for similar items in EconPapers)
JEL-codes: I11 I12 I13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10754-024-09382-3

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