Price Sensitivity of Demand for Prescription Drugs: Exploiting a Regression Kink Design

Marianne Simonsen, Lars Skipper and Niels Skipper
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Lars Skipper: Aarhus School of Business, Aarhus University, Denmark, Postal: 8000 Aarhus C, Denmark
Niels Skipper: School of Economics and Management, Aarhus University, Denmark, Postal: 8000 Aarhus C, Denmark

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper investigates price sensitivity of demand for prescription drugs using drug purchase records for at 20% random sample of the Danish population. We identify price responsiveness by exploiting exogenous variation in prices caused by kinked reimbursement schemes and implement a regression kink design. Thus, within a unifying framework we uncover price sensitivity for different subpopulations and types of drugs. The results suggest low average price responsiveness with corresponding price elasticities ranging from -0.08 to -0.25, implying that demand is inelastic. Individuals with lower education and income are, however, more responsive to the price. Also, essential drugs that prevent deterioration in health and prolong life have lower associated average price sensitivity.

Keywords: Prescription drugs; price; reimbursement schemes; regression kink design (search for similar items in EconPapers)
JEL-codes: I11 I18 (search for similar items in EconPapers)
Pages: 45
Date: 2010-01-15
New Economics Papers: this item is included in nep-hea and nep-ind
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https://repec.econ.au.dk/repec/afn/wp/10/wp10_03.pdf (application/pdf)

Related works:
Journal Article: Price Sensitivity of Demand for Prescription Drugs: Exploiting a Regression Kink Design (2016)
Working Paper: Price Sensitivity of Demand for Prescription Drugs: Exploiting a Regression Kink Design (2010)
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