How Do Copayment Coupons Affect Branded Drug Prices and Quantities Purchased?

Leemore Dafny, Kate Ho and Edward Kong

No 29735, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We estimate the causal effects of drug copayment coupons, which reduce consumer cost-sharing for branded prescription drugs, on net-of-rebate price and quantities sold. Focusing on drugs without generic substitutes, we show that coupon introductions increase quantity sold by 23-25% for the commercial segment relative to Medicare Advantage, where coupons are banned. To quantify the resulting equilibrium price effects, we estimate a discrete choice model of demand for multiple sclerosis drugs and simulate a model of drug price negotiations. We estimate that net-of-rebate prices are 8% higher due to the availability of coupons for most of these drugs.

JEL-codes: I11 I13 L13 (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-ban, nep-com, nep-hea, nep-ias and nep-ind
Note: EH IO
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Citations: View citations in EconPapers (2)

Published as Leemore Dafny & Kate Ho & Edward Kong, 2024. "How Do Copayment Coupons Affect Branded Drug Prices and Quantities Purchased?," American Economic Journal: Economic Policy, vol 16(3), pages 314-346.

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