Healthy Skepticism Library item: 1972

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Publication type: Journal Article

Pavenik N.
Do pharmaceutical prices respond to potential patient out-of-pocket expenses?
Rand J Econ 2002 Aut; 33:(3):469-87
http://www.ncbi.nlm.nih.gov/entrez/query.fcgi?cmd=Retrieve&db=pubmed&dopt=Abstract&list_uids=12585303

Abstract:

Despite the importance of patient insurance in the market for prescription pharmaceuticals, little is known about the impact of patient reimbursement on the pricing behavior of pharmaceutical firms. I examine the link between potential patient out-of-pocket expenses and pharmaceutical 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 reimbursement exposes the patient to the price of a prescribed product. Using a product-level panel data set covering several therapeutic categories before and after the policy change, I find that producers significantly decrease prices after the change in potential patient out-of-pocket expenses. Price declines are most pronounced for brand-name products. Moreover, branded products that face more generic competitors reduce prices more.

Keywords:
Drug Costs* Drug Industry/economics Drugs, Generic/economics Economic Competition Economics, Pharmaceutical*/trends Fees, Pharmaceutical/trends Financing, Personal* Forecasting Germany Health Care Sector Humans Insurance, Pharmaceutical Services/economics* Insurance, Pharmaceutical Services/trends Models, Economic Models, Theoretical Rate Setting and Review/trends United States *longitudinal study Germany United States drug prices consumer drug prices generics INFLUENCE OF PROMOTION: CONSUMER DRUG COSTS INFLUENCE OF PROMOTION: MARKET SHARE PROMOTIONAL STRATEGIES: INDUSTRY