Do Pharmaceutical Prices Respond to Insurance?

Nina Pavcnik

No 7865, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite the importance of patient insurance in the market for prescription pharmaceuticals, little is known about the impact of insurance on the pricing behavior of pharmaceutical firms. This paper examines the link between insurance and pricing using a unique policy experiment from Germany. Starting in 1989, a maximum reimbursement for a given medicine replaced a flat prescription fee. This change in insurance reimbursement exposes the patient to the price of a prescribed product. Using a product level panel dataset covering several therapeutic categories before and after the change in insurance reimbursement, I find that producers significantly decrease prices after the change in insurance. Price declines are most pronounced for brand name products. Moreover, branded products that face more generic competitors reduce prices more.

JEL-codes: I11 L11 (search for similar items in EconPapers)
Date: 2000-08
Note: EH PR PE
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Citations: View citations in EconPapers (8)

Published as Pavcnik, Nina. "Do Pharmaceutical Prices Respond To Potential Patient Out-Of-Pocket Expenses," Rand Journal of Economics, 2002, v33(3,Autumn), 469-487.

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