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On Utilization and Stockpiling of Prescription Drugs when Co-payments Increase: Heterogeneity across Types of Drugs

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  • Niels Skipper

    () (School of Economics and Management, Aarhus University, Denmark)

Abstract

This paper investigates prescription drug utilization changes following an exogenous shift in consumer co-payment caused by a reform in the Danish subsidy scheme for the general public. Two different types of medication are considered – insulin for treatment of the chronic condition diabetes and penicillin for treatment of non-chronic conditions. Using purchasing records for a 20% random sample of the Danish population, I show that increasing co-payments lower the utilization of both drugs. I demonstrate that individuals treated with drugs for chronic conditions react to the policy change by stockpiling on their medications. This has implications for other papers in the literature that use variation in subsidy rates over time to estimate the price elasticity of demand. This is not the case for penicillin however, where price elasticities are estimated to be in the -.18 – -.35 range. Further, I find that the lower part of the income distribution is more price responsive.

Suggested Citation

  • 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.
  • Handle: RePEc:aah:aarhec:2010-12
    as

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    File URL: ftp://ftp.econ.au.dk/afn/wp/10/wp10_12.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Keeler, Emmett B & Newhouse, Joseph P & Phelps, C E, 1977. "Deductibles and the Demand for Medical Care Services: The Theory of a Consumer Facing a Variable Price Schedule under Uncertainty," Econometrica, Econometric Society, vol. 45(3), pages 641-655, April.
    3. Igal Hendel & Aviv Nevo, 2006. "Measuring the Implications of Sales and Consumer Inventory Behavior," Econometrica, Econometric Society, vol. 74(6), pages 1637-1673, November.
    4. Mark Duggan & Fiona Scott Morton, 2010. "The Effect of Medicare Part D on Pharmaceutical Prices and Utilization," American Economic Review, American Economic Association, vol. 100(1), pages 590-607, March.
    5. Amitabh Chandra & Jonathan Gruber & Robin McKnight, 2010. "Patient Cost-Sharing and Hospitalization Offsets in the Elderly," American Economic Review, American Economic Association, vol. 100(1), pages 193-213, March.
    6. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-277, June.
    7. Honore, Bo E, 1992. "Trimmed LAD and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects," Econometrica, Econometric Society, vol. 60(3), pages 533-565, May.
    8. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    9. Paul Contoyannis & Jeremiah Hurley & Paul Grootendorst & Sung-Hee Jeon & Robyn Tamblyn, 2005. "Estimating the price elasticity of expenditure for prescription drugs in the presence of non-linear price schedules: an illustration from Quebec, Canada," Health Economics, John Wiley & Sons, Ltd., vol. 14(9), pages 909-923.
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    More about this item

    Keywords

    Prescription drugs; co-payments; price elasticities; stockpiling;

    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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