Using annual IMS data from 1990 to 1996, we examine empirically whether whether elderly-nonelderly price inflation differentials exist for one medical item, namely, prescription pharmaceuticals. We assess prices for Rx for Rx drugs destined for ultimate use by the elderly vs. 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/payors. We find that at the initial point in the distribution chain, there are no differences in price inflation for the aggregate of drugs destined for use by the elderly vs. the nonelderly. At the intermediate sell-in to pharmacy distribution point, we examine antibiotics (ABs), antidepressants (ADs) and calcium channel blockers (CCBs). For ABs, since 1992 elderly price inflation is somewhat greater 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, elderly price inflation is considerably less 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 adjusts for variations in quality. At the final retail sell-out point, we only examine ADs. We find that since 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.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
6182.
Length: Date of creation: Sep 1997 Date of revision: Handle: RePEc:nbr:nberwo:6182
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Find related papers by JEL classification: I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
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.:
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.
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