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Compassion and cost: The dual role of reference pricing

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  • Yesim Köksal, Miyase

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

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    Abstract

    Providing health insurance involves a trade-off between the benefits from risk spreading and the costs due to moral hazard. Focusing on pharmaceuticals consumption, this paper examines theoretically whether reference pricing, requiring individuals to pay the price difference if, in this case, they don’t buy the cheaper parallel imported drug, can ease this trade-off – an issue which has not previously been pointed out in the debate on health insurance. The results indicate that, if individuals are extremely risk-averse, a policy shift from coinsurance to reference pricing would do this by providing more insurance while decreasing moral hazard.

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    File URL: http://hdl.handle.net/2077/25499
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    Bibliographic Info

    Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 498.

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    Length: 36 pages
    Date of creation: 18 May 2011
    Date of revision:
    Handle: RePEc:hhs:gunwpe:0498

    Contact details of provider:
    Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
    Phone: 031-773 10 00
    Web page: http://www.handels.gu.se/econ/
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    Related research

    Keywords: reference pricing; moral hazard; pharmaceuticals; parallel imports;

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