Do Pharmaceutical Prices Respond to Insurance?
Despite the importance of patient insurance in the market for prescription pharmaceuticals, little is known about the impact of insurance on the pricing behavior of pharmaceutical firms. This paper examines the link between insurance and pricing using a unique policy experiment from Germany. Starting in 1989, a maximum reimbursement for a given medicine replaced a flat prescription fee. This change in insurance reimbursement exposes the patient to the price of a prescribed product. Using a product level panel dataset covering several therapeutic categories before and after the change in insurance reimbursement, I find that producers significantly decrease prices after the change in insurance. Price declines are most pronounced for brand name products. Moreover, branded products that face more generic competitors reduce prices more.
|Date of creation:||Aug 2000|
|Date of revision:|
|Publication status:||published as Pavcnik, Nina. "Do Pharmaceutical Prices Respond To Potential Patient Out-Of-Pocket Expenses," Rand Journal of Economics, 2002, v33(3,Autumn), 469-487.|
|Note:||HC PR PE|
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- Sara Ellison Fisher & Iain Cockburn & Zvi Griliches & Jerry Hausman, 1997.
"Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins,"
RAND Journal of Economics,
The RAND Corporation, vol. 28(3), pages 426-446, Autumn.
- Ellison, S & Cockburn, I & Griliches, A & Hausman, J, 1996. "Characteristics of Demand for Pharmaceutical Products : an Examination of four Cephalosporins," Working papers 96-24, Massachusetts Institute of Technology (MIT), Department of Economics.
- Zweifel, Peter & Crivelli, Luca, 1996. "Price Regulation of Drugs: Lessons from Germany," Journal of Regulatory Economics, Springer, vol. 10(3), pages 257-73, November.
- 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 251-77, June.
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