Reference pricing and cost-sharing: Theory and evidence on German off-patent drugs

Annika Herr, Torben Stühmeier and Tobias Wenzel
Authors registered in the RePEc Author Service: Torben Stuehmeier

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper evaluates the impact of reference pricing on prices and co-payments in the (German) market for off-patent pharmaceuticals. We present a theoretical model with price-sensitive and loyal consumers that shows that a decrease in the reference price affects the consumers' co-payments in a non-monotonic way: For high reference prices, a marginally lower reference price may lead to lower co-payments. However, for low reference prices a further reduction may result into higher consumer co-payments. We use quarterly data on reference priced drugs covered by the social health insurance in Germany over the period 2007 - 2010 to analyze the empirical effects of reference price reductions. We find that, while prices decrease due to the reduction, co-payments behave non-monotonically and indeed increase if the reference price is sufficiently low.

JEL-codes: I11 I18 L13 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-com, nep-hea and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100556

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