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The impact of cost-sharing on prescription drug demand: evidence from a double-difference regression kink design

Simona Gamba, Niklas Jakobsson and Mikael Svensson

The European Journal of Health Economics, 2022, vol. 23, issue 9, No 11, 1599 pages

Abstract: Abstract Pharmaceuticals represent the third-largest expenditure item in health care spending in the OECD countries, and cost growth is around 5% per year in many OECD countries. One possible way to contain the rise in pharmaceutical spending is the use of cost-sharing schemes that makes insured individuals directly bear parts of the cost of a drug. This study estimates the price sensitivity of demand for prescription drugs using data on all prescription drug purchases from a random sample of 400,000 Swedes followed from 2010 to 2013. We use a regression kink design (RKD) by exploiting the kinked Swedish cost-sharing scheme to assess the price elasticity. Further, since the cost-sharing scheme has changed over time, we also use a double-difference RKD to account for potential confounding nonlinearities around the kink. Our results indicate that the standard RKD results are biased and exaggerate the price sensitivity. Our preferred double-difference RKD specifications show no or minor price sensitivity (95% CI price elasticity from − 0.12 to 0.02). The results are similar in several sub-group analyses across age groups, sexes, and income quartiles.

Keywords: Cost-sharing; Drug consumption; Health-care; Moral hazard; Regression kink design; Natural experiment (search for similar items in EconPapers)
JEL-codes: C33 D12 I11 I18 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10198-022-01446-w

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