Compassion and cost: The dual role of reference pricing
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.
|Date of creation:||18 May 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
More information through EDIRC
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.:
- Kurt R. Brekke & Astrid L. Grasdal & Tor Helge Holmås, 2007.
"Regulation and Pricing of Pharmaceuticals: Reference Pricing or Price Cap Regulation?,"
CESifo Working Paper Series
2059, CESifo Group Munich.
- Brekke, Kurt R. & Grasdal, Astrid L. & Holms, Tor Helge, 2009. "Regulation and pricing of pharmaceuticals: Reference pricing or price cap regulation?," European Economic Review, Elsevier, vol. 53(2), pages 170-185, February.
- Brekke, Kurt R. & Grasdal, Astrid L. & Holmås, Tor Helge, 2006. "Regulation and Pricing of Pharmaceuticals: Reference Pricing or Price Cap Regulation?," Working Papers in Economics 14/06, University of Bergen, Department of Economics.
- Mats A. Bergman & Niklas Rudholm, 2003. "The Relative Importance of Actual and Potential Competition: Empirical Evidence From the Pharmaceuticals Market," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 455-467, December.
- Coulson, N Edward, et al, 1995.
"Estimating the Moral-Hazard Effect of Supplemental Medical Insurance in the Demand for Prescription Drugs by the Elderly,"
American Economic Review,
American Economic Association, vol. 85(2), pages 122-26, May.
- Coulson, N.E. & Terza, J. & Neslusan, C.A. & Stuart, B., 1995. "Estimating the Moral Hazard Effect of Supplemental Medical Insurance in the Demand for Prescription Drugs by the Elderly," Papers 04-95-01, Pennsylvania State - Department of Economics.
- Martin Feldstein & Jonathan Gruber, 1995.
"A Major Risk Approach to Health Insurance Reform,"
in: Tax Policy and the Economy, Volume 9, pages 103-130
National Bureau of Economic Research, Inc.
- Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-80, Part I, M.
- Cutler, David M. & Zeckhauser, Richard J., 2000.
"The anatomy of health insurance,"
Handbook of Health Economics,
in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643
- Lundin, Douglas, 2000. "Moral hazard in physician prescription behavior," Journal of Health Economics, Elsevier, vol. 19(5), pages 639-662, September.
- Nina Pavcnik, 2002. "Do Pharmaceutical Prices Respond to Potential Patient Out-of-Pocket Expenses?," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 469-487, Autumn.
- Joan Costa-Font & Panos Kanavos & Joan Rovira, 2007. "Determinants of out-of-pocket pharmaceutical expenditure and access to drugs in Catalonia," Applied Economics, Taylor & Francis Journals, vol. 39(5), pages 541-551.
- Thomas Aronsson & Mats Bergman & Niklas Rudholm, 2001. "The Impact of Generic Drug Competition on Brand Name Market Shares – Evidence from Micro Data," Review of Industrial Organization, Springer, vol. 19(4), pages 423-433, December.
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
When requesting a correction, please mention this item's handle: RePEc:hhs:gunwpe:0498. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie Andersson)
If references are entirely missing, you can add them using this form.