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When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization

Listed author(s):
  • Leemore Dafny
  • Christopher Ody
  • Matthew Schmitt
Registered author(s):

    Branded pharmaceutical manufacturers frequently offer "copay coupons'" that insulate consumers from cost-sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross-state and cross-consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending by $30 to $120 million per drug, or $700 million to $2.7 billion for our sample alone.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 22745.

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    Date of creation: Oct 2016
    Publication status: published as Leemore Dafny & Christopher Ody & Matt Schmitt, 2017. "When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization," American Economic Journal: Economic Policy, vol 9(2), pages 91-123.
    Handle: RePEc:nbr:nberwo:22745
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