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The impact of cost-sharing on prescription drug demand: evidence from a double-difference regression kink design

Author

Listed:
  • Simona Gamba

    (Universitá Cattolica Del Sacro Cuore)

  • Niklas Jakobsson

    (Karlstad University)

  • Mikael Svensson

    (University of Gothenburg)

Abstract

Pharmaceuticals represent the third-largest expenditure item in health care spending in the OECD countries, and cost growth is around 5% per year in many OECD countries. One possible way to contain the rise in pharmaceutical spending is the use of cost-sharing schemes that makes insured individuals directly bear parts of the cost of a drug. This study estimates the price sensitivity of demand for prescription drugs using data on all prescription drug purchases from a random sample of 400,000 Swedes followed from 2010 to 2013. We use a regression kink design (RKD) by exploiting the kinked Swedish cost-sharing scheme to assess the price elasticity. Further, since the cost-sharing scheme has changed over time, we also use a double-difference RKD to account for potential confounding nonlinearities around the kink. Our results indicate that the standard RKD results are biased and exaggerate the price sensitivity. Our preferred double-difference RKD specifications show no or minor price sensitivity (95% CI price elasticity from − 0.12 to 0.02). The results are similar in several sub-group analyses across age groups, sexes, and income quartiles.

Suggested Citation

  • Simona Gamba & Niklas Jakobsson & Mikael Svensson, 2022. "The impact of cost-sharing on prescription drug demand: evidence from a double-difference regression kink design," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(9), pages 1591-1599, December.
    • Handle: RePEc:spr:eujhec:v:23:y:2022:i:9:d:10.1007_s10198-022-01446-w
    DOI: 10.1007/s10198-022-01446-w
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    More about this item

    Keywords

    Cost-sharing; Drug consumption; Health-care; Moral hazard; Regression kink design; Natural experiment;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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