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Do Physicians Respond to the Costs and Cost-Sensitivity of Their Patients?

Author

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  • Mariana Carrera
  • Dana P. Goldman
  • Geoffrey Joyce
  • Neeraj Sood

Abstract

We use individual level data on purchases of cholesterol-lowering drugs to study the responses of physicians and patients to variation in the cost of drugs. In a sample of first-time statin prescriptions to employees from 12 Fortune 500 firms, we find that co-pay variation across plans has a small effect on the choice of drug, and this effect does not vary with patient income. After the highly publicized patent expiration of Zocor, however, prescriptions for this drug increased substantially, especially for lower income patients. Our analysis suggests that physicians can perceive the price sensitivity of their patients and adjust their initial prescriptions accordingly, but only in response to a large and universal price change.

Suggested Citation

  • Mariana Carrera & Dana P. Goldman & Geoffrey Joyce & Neeraj Sood, 2018. "Do Physicians Respond to the Costs and Cost-Sensitivity of Their Patients?," American Economic Journal: Economic Policy, American Economic Association, vol. 10(1), pages 113-152, February.
    • Handle: RePEc:aea:aejpol:v:10:y:2018:i:1:p:113-52
    Note: DOI: 10.1257/pol.20150523
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    Citations

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    Cited by:

    1. Lee, Chung-Ying, 2020. "Pricing strategy and moral hazard: Copay coupons in pharmaceuticals," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    2. Suppliet, Moritz, 2020. "Umbrella branding in pharmaceutical markets," Journal of Health Economics, Elsevier, vol. 73(C).
    3. Mariana Carrera & Sofia Villas-Boas, 2023. "Generic Aversion and Observational Learning in the Over-the-Counter Drug Market," American Economic Journal: Applied Economics, American Economic Association, vol. 15(3), pages 380-410, July.
    4. Kyle, Margaret K., 2022. "Incentives for pharmaceutical innovation: What’s working, what’s lacking," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    5. Sebastian Linde & Brandon Norton & Ralph Siebert, 2019. "The Effect of Bargaining Power Determinants on Pharmaceutical Prices," CESifo Working Paper Series 7988, CESifo.
    6. Laura V Minard & Amber Corkum & Ingrid Sketris & Judith Fisher & Ying Zhang & Ahmed Saleh, 2016. "Trends in Statin Use in Seniors 1999 to 2013: Time Series Analysis," PLOS ONE, Public Library of Science, vol. 11(7), pages 1-15, July.
    7. Meng-Chi Tang & Yi-Nong Wu, 2020. "Medical providers as double agents in a universal health care system: evidence from generic pharmaceutical adoption in Taiwan," Empirical Economics, Springer, vol. 59(1), pages 169-203, July.
    8. Newham, Melissa & Valente, Marica, 2024. "The cost of influence: How gifts to physicians shape prescriptions and drug costs," Journal of Health Economics, Elsevier, vol. 95(C).
    9. Brekke, Kurt R. & Dalen, Dag Morten & Straume, Odd Rune, 2022. "Paying for pharmaceuticals: uniform pricing versus two-part tariffs," Journal of Health Economics, Elsevier, vol. 83(C).
    10. Fiorentini, Gianluca & Bruni, Matteo Lippi & Mammi, Irene, 2022. "The same old medicine but cheaper: The impact of patent expiry on physicians’ prescribing behaviour," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 37-68.
    11. Wu, Bingxiao, 2019. "Physician agency in China: Evidence from a drug-percentage incentive scheme," Journal of Development Economics, Elsevier, vol. 140(C), pages 72-89.
    12. Christopher Bates & Susan J. Méndez, 2024. "Therapeutic Substitution in Response to Patent Expiry? Statins in Australia," Economic Papers, The Economic Society of Australia, vol. 43(2), pages 112-123, June.
    13. Rabideau, Brendan & Eisenberg, Matthew D. & Reid, Rachel & Sood, Neeraj, 2021. "Effects of employer-offered high-deductible plans on low-value spending in the privately insured population," Journal of Health Economics, Elsevier, vol. 76(C).
    14. Christian Posso & Jorge Tamayo & Arlen Guarin & Estefania Saravia, 2024. "Luck of the Draw: The Causal Effect of Physicians on Birth Outcomes," Borradores de Economia 1269, Banco de la Republica de Colombia.
    15. Magno, Cielo & Guzman, Ricardo Rafael S., 2019. "Drug price sensitivity among physicians in a developing healthcare system: Evidence from the Philippine market for statins and beta blockers," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 268-279.
    16. Ghosh, Ausmita & Simon, Kosali & Sommers, Benjamin D., 2019. "The Effect of Health Insurance on Prescription Drug Use Among Low-Income Adults:Evidence from Recent Medicaid Expansions," Journal of Health Economics, Elsevier, vol. 63(C), pages 64-80.

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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