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On The Demand For Prescription Drugs: Heterogeneity In Price Responses

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  • Niels Skipper

Abstract

This paper estimates the price elasticity of demand for prescription drugs using an exogenous shift in consumer co‐payment caused by a reform in the Danish subsidy scheme for the general public. Using purchasing records for the entire Danish population, I show that the average price response for the most commonly used drug yields demand elasticities in the range of –0.36 to –0.5. The reform is shown to affect women, the elderly, and immigrants the most. Furthermore, this paper shows significant heterogeneity in the price response over different types of antibiotics, suggesting that the price elasticity of demand varies considerably even across relatively similar drugs. Copyright © 2012 John Wiley & Sons, Ltd.

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  • Niels Skipper, 2013. "On The Demand For Prescription Drugs: Heterogeneity In Price Responses," Health Economics, John Wiley & Sons, Ltd., vol. 22(7), pages 857-869, July.
    • Handle: RePEc:wly:hlthec:v:22:y:2013:i:7:p:857-869
    DOI: 10.1002/hec.2864
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    References listed on IDEAS

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    1. Marianne Simonsen & Lars Skipper & Niels Skipper, 2016. "Price Sensitivity of Demand for Prescription Drugs: Exploiting a Regression Kink Design," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(2), pages 320-337, March.
    2. 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 251-277, June.
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    4. Granlund, David, 2010. "Price and welfare effects of a pharmaceutical substitution reform," Journal of Health Economics, Elsevier, vol. 29(6), pages 856-865, December.
    5. Paul Contoyannis & Jeremiah Hurley & Paul Grootendorst & Sung‐Hee Jeon & Robyn Tamblyn, 2005. "Estimating the price elasticity of expenditure for prescription drugs in the presence of non‐linear price schedules: an illustration from Quebec, Canada," Health Economics, John Wiley & Sons, Ltd., vol. 14(9), pages 909-923, September.
    6. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-209, January.
    7. Amitabh Chandra & Jonathan Gruber & Robin McKnight, 2010. "Patient Cost-Sharing and Hospitalization Offsets in the Elderly," American Economic Review, American Economic Association, vol. 100(1), pages 193-213, March.
    8. Keeler, Emmett B & Newhouse, Joseph P & Phelps, C E, 1977. "Deductibles and the Demand for Medical Care Services: The Theory of a Consumer Facing a Variable Price Schedule under Uncertainty," Econometrica, Econometric Society, vol. 45(3), pages 641-655, April.
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    Cited by:

    1. Feng Huang & Li Gan`, 2017. "The Impacts of China's Urban Employee Basic Medical Insurance on Healthcare Expenditures and Health Outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 149-163, February.
    2. Hongfeng Zhang & Peng Cheng & Lu Huang, 2023. "The Impact of the Medical Insurance System on the Health of Older Adults in Urban China: Analysis Based on Three-Period Panel Data," IJERPH, MDPI, vol. 20(5), pages 1-17, February.
    3. Sergei Koulayev & Niels Skipper & Emilia Simeonova, 2013. "Who Is in Control? The Determinants of Patient Adherence with Medication Therapy," NBER Working Papers 19496, National Bureau of Economic Research, Inc.
    4. Sergei Koulayev & Emilia Simeonova & Niels Skipper, 2017. "Can Physicians Affect Patient Adherence With Medication?," Health Economics, John Wiley & Sons, Ltd., vol. 26(6), pages 779-794, June.
    5. Alpert, Abby, 2016. "The anticipatory effects of Medicare Part D on drug utilization," Journal of Health Economics, Elsevier, vol. 49(C), pages 28-45.
    6. Cristina Hernández-Izquierdo & Beatriz González López-Valcárcel & Stephen Morris & Mariya Melnychuk & Ignacio Abásolo Alessón, 2019. "The effect of a change in co-payment on prescription drug demand in a National Health System: The case of 15 drug families by price elasticity of demand," PLOS ONE, Public Library of Science, vol. 14(3), pages 1-39, March.
    7. Mario Martínez-Jiménez & Pilar García-Gómez & Jaume Puig-Junoy, 2021. "The Effect of Changes in Cost Sharing on the Consumption of Prescription and Over-the-Counter Medicines in Catalonia," IJERPH, MDPI, vol. 18(5), pages 1-21, March.

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