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Price Sensitivity of Demand for Prescription Drugs: Exploiting a Regression Kink Design

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  • Marianne Simonsen
  • Lars Skipper
  • Niels Skipper

Abstract

We investigate price sensitivity of demand for prescription drugs, using drug purchase records for the entire Danish population. We identify price responsiveness by exploiting variation in prices caused by kinked reimbursement schemes and implement a regression kink design. The results suggest some price responsiveness with corresponding price elasticities ranging from −0.2 to −0.7. Individuals with chronic disease and especially individuals above the age of 65 respond less to the price of drugs. Copyright © 2015 John Wiley & Sons, Ltd.

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  • Marianne Simonsen & Lars Skipper & Niels Skipper, 2016. "Price Sensitivity of Demand for Prescription Drugs: Exploiting a Regression Kink Design," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(2), pages 320-337, March.
  • Handle: RePEc:wly:japmet:v:31:y:2016:i:2:p:320-337
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    1. The demand elasticity of prescription drugs
      by Economic Logician in Economic Logic on 2010-02-15 21:15:00

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    2. Frederik Plesner Lyngse, 2020. "Liquidity Constraints and Demand for Healthcare: Evidence from Danish Welfare Recipients," Papers 2010.14651, arXiv.org.
    3. Martin Huber, 2019. "An introduction to flexible methods for policy evaluation," Papers 1910.00641, arXiv.org.
    4. Roel van Elk & Michelle Ebens & Dinand Webbink & Adam Booij, 2011. "The effect of the supplementary grant on parental contribution in the Netherlands," CPB Discussion Paper 187.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Heléne Lundqvist & Matz Dahlberg & Eva Mörk, 2014. "Stimulating Local Public Employment: Do General Grants Work?," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 167-192, February.
    6. David E. Card & David S. Lee & Zhuan Pei & Andrea Weber, 2012. "Nonlinear Policy Rules and the Identification and Estimation of Causal Effects in a Generalized Regression Kink Design," NRN working papers 2012-14, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    7. Chiang, Harold D. & Hsu, Yu-Chin & Sasaki, Yuya, 2019. "Robust uniform inference for quantile treatment effects in regression discontinuity designs," Journal of Econometrics, Elsevier, vol. 211(2), pages 589-618.
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    9. Niels Skipper, 2010. "On Utilization and Stockpiling of Prescription Drugs when Co-payments Increase: Heterogeneity across Types of Drugs," Economics Working Papers 2010-12, Department of Economics and Business Economics, Aarhus University.
    10. Frederik Plesner Lyngse, 2020. "Liquidity Constraints and Demand for Healthcare: Evidence from Danish Welfare Recipients," CEBI working paper series 20-28, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    11. Yan Song & Douglas Barthold, 2018. "The effects of state‐level pharmacist regulations on generic substitution of prescription drugs," Health Economics, John Wiley & Sons, Ltd., vol. 27(11), pages 1717-1737, November.
    12. Sergei Koulayev & Emilia Simeonova & Niels Skipper, 2017. "Can Physicians Affect Patient Adherence With Medication?," Health Economics, John Wiley & Sons, Ltd., vol. 26(6), pages 779-794, June.
    13. Datta Gupta, Nabanita & Kleinjans, Kristin J. & Larsen, Mona, 2011. "The Effect of an Acute Health Shock on Work Behavior: Evidence from Different Health Care Regimes," IZA Discussion Papers 5843, Institute of Labor Economics (IZA).
    14. Sarah Deschênes & Rozenn Hotte, 2019. "Assessing the Effects of an Education Policy on Women's Well-being: Evidence from Benin," Working Papers halshs-02179704, HAL.
    15. Marianne Simonsen & Lars Skipper & Niels Skipper, 2017. "Piling Pills? Forward-Looking Behavior and Stockpiling of Prescription Drugs," Economics Working Papers 2017-08, Department of Economics and Business Economics, Aarhus University.
    16. Datta Gupta, Nabanita & Kleinjans, Kristin J. & Larsen, Mona, 2015. "The effect of a severe health shock on work behavior: Evidence from different health care regimes," Social Science & Medicine, Elsevier, vol. 136, pages 44-51.
    17. Roel van Elk & Michelle Ebens & Dinand Webbink & Adam Booij, 2011. "The effect of the supplementary grant on parental contribution in the Netherlands," CPB Discussion Paper 187, CPB Netherlands Bureau for Economic Policy Analysis.
    18. Menezes-Filho, Naercio & Politi, Ricardo, 2020. "Estimating the causal effects of private health insurance in Brazil: Evidence from a regression kink design," Social Science & Medicine, Elsevier, vol. 264(C).
    19. Michihito Ando, 2017. "How much should we trust regression-kink-design estimates?," Empirical Economics, Springer, vol. 53(3), pages 1287-1322, November.
    20. SØren Leth‐Petersen & Niels Skipper, 2014. "Income And The Use Of Prescription Drugs For Near Retirement Individuals," Health Economics, John Wiley & Sons, Ltd., vol. 23(3), pages 314-331, March.
    21. Camille Landais, 2015. "Assessing the Welfare Effects of Unemployment Benefits Using the Regression Kink Design," American Economic Journal: Economic Policy, American Economic Association, vol. 7(4), pages 243-278, November.
    22. Chiang, Harold D. & Sasaki, Yuya, 2019. "Causal inference by quantile regression kink designs," Journal of Econometrics, Elsevier, vol. 210(2), pages 405-433.
    23. Sebastian Garmann, 2014. "The causal effect of coalition governments on fiscal policies: evidence from a Regression Kink Design," Applied Economics, Taylor & Francis Journals, vol. 46(36), pages 4490-4507, December.

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    JEL classification:

    • 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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