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On Utilization and Stockpiling of Prescription Drugs when Co-payments Increase: Heterogeneity across Types of Drugs

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  • Niels Skipper

    (School of Economics and Management, Aarhus University, Denmark)

Abstract

This paper investigates prescription drug utilization changes following an exogenous shift in consumer co-payment caused by a reform in the Danish subsidy scheme for the general public. Two different types of medication are considered – insulin for treatment of the chronic condition diabetes and penicillin for treatment of non-chronic conditions. Using purchasing records for a 20% random sample of the Danish population, I show that increasing co-payments lower the utilization of both drugs. I demonstrate that individuals treated with drugs for chronic conditions react to the policy change by stockpiling on their medications. This has implications for other papers in the literature that use variation in subsidy rates over time to estimate the price elasticity of demand. This is not the case for penicillin however, where price elasticities are estimated to be in the -.18 – -.35 range. Further, I find that the lower part of the income distribution is more price responsive.

Suggested Citation

  • Niels Skipper, 2010. "On Utilization and Stockpiling of Prescription Drugs when Co-payments Increase: Heterogeneity across Types of Drugs," Economics Working Papers 2010-12, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2010-12
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    File URL: https://repec.econ.au.dk/repec/afn/wp/10/wp10_12.pdf
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    References listed on IDEAS

    as
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    4. 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.
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    8. 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.
    9. 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.
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    Cited by:

    1. Herr, A. & Suppliet, M., 2011. "Co-Payment Exemptions and Reference Prices: an Empirical Study of Pharmaceutical Prices in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 11/18, HEDG, c/o Department of Economics, University of York.
    2. Rättö, Hanna & Kurko, Terhi & Martikainen, Jaana E. & Aaltonen, Katri, 2021. "The impact of a co-payment increase on the consumption of type 2 antidiabetics – A nationwide interrupted time series analysis," Health Policy, Elsevier, vol. 125(9), pages 1166-1172.
    3. 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.
    4. Astrid Kiil & Kurt Houlberg, 2014. "How does copayment for health care services affect demand, health and redistribution? A systematic review of the empirical evidence from 1990 to 2011," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(8), pages 813-828, November.

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    More about this item

    Keywords

    Prescription drugs; co-payments; price elasticities; stockpiling;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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