Advanced Search
MyIDEAS: Login

Is Price Inflation Different for the Elderly? An Empirical Analysis of Prescription Drugs

Contents:

Author Info

  • Ernst R. Berndt

    (MIT Sloan School of Management and NBER)

  • Iain M. Cockburn

    (University of British Columbia and NBER)

  • Douglas L. Cocks

    (Eli Lilly and Company)

  • Arnold M. Epstein

    (Harvard Medical School)

  • Zvi Griliches

    (Harvard University and NBER)

Abstract

Recently controversy has surrounded the issue of whether Social Security payments to the elderly should continue to be adjusted automatically according to changes in the Consumer Price Index (CPI). One issue in the public policy debate concerns whether price inflation is different for the elderly, particularly because the official Bureau of Labor Statistics price indexes for medical care have been growing more rapidly than the overall CPI, and medical care expenditures constitute a larger proportion of the elderly’s budget than of the young’s. Using annual IMS data from 1990 to 1996, we examine empirically whether elderly-nonelderly price inflation differentials exist for prescription pharmaceuticals. We assess prices for prescription drugs destined for ultimate use by the elderly versus the nonelderly at three points in the distribution chain: initial sales from manufacturers, intermediate purchases by retail pharmacies, and final sales from retail pharmacies to patients or payors. We find that at the initial point in the distribution chain, no differences in price inflation exist for the aggregate of drugs destined for use by the elderly versus those for the nonelderly. At the intermediate sell-in point to pharmacy distribution, we examine antibiotics (ABs), antidepressants (ADs), and calcium channel blockers (CCBs). For ABs, since 1992 price inflation has been somewhat greater for the elderly than for the young, reflecting in part the elderly’s more intensive use of newer branded products having fewer side effects, adverse drug interactions and more convenient dosing—attributes of particular importance to the elderly. For ADs, price inoation is considerably less for the elderly than for the young, due in large part to the elderly’s greater use of older generic products. For CCBs, elderly-nonelderly differentials are negligible. None of these differentials adjust for variations in quality. At the final retail sell-out point, we examine only ADs. We find that because retailers obtain larger gross margins on generic than on branded products, and because the elderly are disproportionately large users of generic ADs, the elderly-nonelderly price inflation differential benefiting the elderly at the intermediate point is reduced considerably at final sale.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1057&context=fhep
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by De Gruyter in its journal Forum for Health Economics & Policy.

Volume (Year): 1 (1998)
Issue (Month): ()
Pages: 3

as in new window
Handle: RePEc:bpj:fhecpo:v:1:y:1998:n:3

Contact details of provider:
Web page: http://www.degruyter.com

Order Information:
Web: http://www.degruyter.com/view/j/fhep

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1996. "Are Medical Prices Declining?," NBER Working Papers 5750, National Bureau of Economic Research, Inc.
  2. Ernst R. Berndt & Zvi Griliches & Joshua G. Rosett, 1992. "Auditing the Producer Price Index: Micro Evidence From Prescription Pharmaceutical Preparations," NBER Working Papers 4009, National Bureau of Economic Research, Inc.
  3. Griliches, Z. & Cockborn, I., 1993. "Generics and New Goods in Pharmaceutical Price Indexes," Harvard Institute of Economic Research Working Papers 1664, Harvard - Institute of Economic Research.
  4. David M. Cutler & Ellen Meara, 1998. "The Medical Costs of the Young and Old: A Forty-Year Perspective," NBER Chapters, in: Frontiers in the Economics of Aging, pages 215-246 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Sara Fisher Ellison & Catherine Wolfram, 2001. "Pharmaceutical Prices and Political Activity," NBER Working Papers 8482, National Bureau of Economic Research, Inc.
  2. Bart Hobijn & David Lagakos, 2003. "Inflation inequality in the United States," Staff Reports 173, Federal Reserve Bank of New York.
  3. Daron Acemoglu & Joshua Linn, 2003. "Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry," NBER Working Papers 10038, National Bureau of Economic Research, Inc.
  4. Sara Fisher Ellison & Catherine Wolfram, 2004. "Coordinating on Lower Prices: Pharmaceutical Pricing Under Political Pressure," Economics Working Papers 0048, Institute for Advanced Study, School of Social Science.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bpj:fhecpo:v:1:y:1998:n:3

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.