Generic utilization and cost-sharing for prescription drugs

Teresa Bernard Gibson, Catherine G. McLaughlin and Dean G. Smith

A chapter in Pharmaceutical Markets and Insurance Worldwide, 2010, pp 195-219 from Emerald Group Publishing Limited

Abstract: Purpose – The purpose of this study is to estimate the own- and cross-price elasticity of brand-name outpatient prescription drug cost-sharing for maintenance medications and to estimate the effects of changes in the price differential between generic and brand-name prescription drugs. Methodology/approach – We first review the literature on the effects of an increase in brand-name drug patient cost-sharing. In addition, we analyze two examples of utilization patterns in filling behavior associated with an increase in brand-name cost-sharing for patients in employer-sponsored health plans with chronic illness. Findings – We found that the own-price elasticity of demand for brand-name prescription drugs was inelastic. However, the cross-price elasticity was not consistent in sign, and utilization patterns for generic prescription fills did not always increase after a rise in brand-name cost-sharing. Research limitations – The empirical examples are limited to the experience of patients with employer-sponsored health insurance. Practical implications – The common practice of increasing brand-name prescription drug patient cost-sharing to increase consumption of generic drugs may not always result in higher generic medication use. Higher brand-name drug cost-sharing levels may result in discontinuation of chronic therapies, instead of therapeutic switching. Originality/value of chapter – The value of this chapter is its singular focus on the effects of higher brand-name drug cost-sharing through a synthesis of the literature examining the own- and cross-price elasticity of demand for brand-name medications and two empirical examples of the effects of changes in brand-name cost-sharing.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aheszz:s0731-2199(2010)0000022012

DOI: 10.1108/S0731-2199(2010)0000022012

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