Copayments and the Demand for Prescription Drugs


Book Description

Increasing prescription drug cost-sharing by patients - in the form of increasing copayments - is one of the most striking, and controversial, developments in the health sector over recent years. The exact nature and use of copayments by health care insurers continues to be hot topic of debate. This detailed and meticulously researched study is one of the first of its kind: its results suggest that differences in copayments influence choice, shifting market share for these drugs. Differential copayments for medically equivalent alternatives is one strategy insurers use to affect the choice of one drug over another when faced with differing prices. Relative copayments for therapeutically equivalent drugs, imposed by insurers, are shown to have a significant impact on consumer choice – the implication being that physicians are acting in patients’ financial, as well as medical interest. Unlike much work in this area, Copayments and the Demand for Prescription Drugs is not sponsored by any drug company; and its up-to-date results, established on a firm scientific basis, are entirely unbiased. Its results have applications for the private insurance and pharmaceutical sectors as well as the public sector, and it will be of great interest to professionals and researchers in the fields of health economics, economic and healthcare policy-making, and microeconomics: its primary findings are especially critical to the United States public health sector which is on the cusp of providing a prescription drug benefit to nearly forty million elderly Americans.







Copayments and Demand for Medical Care


Book Description

Employing a Zellner-type indirect regression technique, and data from the 1972 California Copayment Experiment, the authors attempt to assess the impact of a copayment requirement on utilization of health care resources by the poor. Focus is on three questions regarding effects of an increase in out-of-pocket cost of physician office visits: (1) Will such an increase inhibit demand for ambulatory care? (2) Will it increase or decrease demand for hospitalization? (3) How will it affect total resource cost of health care services, both in and out of hospitals? The results indicate that a $1 copayment requirement apparently decreases demand for physician visits by 8 percent and increases demand for hospital inpatient services by 17 percent. Although the confidence intervals are large, point estimates indicate that copayment increases overall program costs by a statistically insignificant 3 to 8 percent. Thus copayments could be self-defeating as a method of controlling medical costs in a welfare population.







Is Drug Coverage a Free Lunch?


Book Description

"Recently, many US employers have adopted less generous prescription drug benefits. In addition, the U.S. began to offer prescription drug insurance to approximately 42 million Medicare beneficiaries in 2006. We use data on individual health insurance claims and benefit data from 1997-2003 to study the effects of changing consumers' co-payments for prescription drugs on the quantity demanded and expenditure on prescription drugs, inpatient care and outpatient care. We allow for effects both in the year of the co-payment change and in the year following the change. Our results show that increases in prescription drug prices reduce both the use of and spending on prescription drugs. However, consumers substitute the use of outpatient care and inpatient care for prescription drug use, and the expenditure reductions on prescription drugs are largely offset by the increases in other spending"--National Bureau of Economic Research web site.










The Right Price


Book Description

The prescription drug market -- Proposed solutions for rising drug prices -- Measuring the value of prescription drugs -- Measuring drug value : whose job is it anyway? -- Institute for Clinical and Economic Review (ICER) -- Other US value assessment frameworks -- Do drugs for special populations warrant higher prices? -- Improving value measurement -- Aligning prices with value -- The path forward.




How Does Cost-Sharing Affect Drug Purchases? Insurance Regimes in the Private Market for Prescription Drugs


Book Description

Abstract: Insurance for prescription drugs is characterized by two types of cost-sharing: flat copayments and variable coinsurance. We develop a theoretical model to show that refill purchases of preventive drugs (compliance) are lower under coinsurance due to the consumer's exposure to variation in drug prices. Coinsurance creates countervailing incentives. Consumers who never comply under flat copayments might find it optimal to comply if they drew a relatively low price under coinsurance. In contrast, consumers who always comply under flat copayments might stop complying if they drew a relatively high price under coinsurance. Our theory shows the second effect dominates under certain distributional assumptions about health states. Empirically, we derive comparable models for compliance behavior in the two regimes. Using claims data from eight large firms, we focus our analysis on diabetes, a common chronic condition that leads to severe complications when not continuously treated with medications. Propensity score methods are used to create matched samples for the two insurance regimes. We find that when coinsurance and flat copayments have the same expected out-of-pocket of $9, at least 34% of patients under copayments would fully comply and refill their medication over the next 90 days, compared to only 24% under coinsurance. Similarly, under copayments, moving from the 25th percentile to the 75th percentile of cost sharing results in a significantly lower shift into the non-compliance state compared with coinsurance. Thus, the empirical results confirm the main theoretical predictions. This research is a substantial revision and extension of our earlier 2004 NBER working paper no. 10738.




Tracking Universal Health Coverage


Book Description

This report is the first of its kind to measure health service coverage and financial protection to assess countries' progress towards universal health coverage. It shows that at least 400 million people do not have access to one or more essential health services and 6% of people in low- and middle-income countries are tipped into or pushed further into extreme poverty because of health spending. Universal health coverage (UHC) means that all people receive the quality essential health services they need without being exposed to financial hardship. A significant number of countries at all levels of development are embracing the goal of UHC as the right thing to do for their citizens. It is a powerful social equalizer and contributes to social cohesion and stability. Every country has the potential to improve the performance of its health system in the main dimensions of UHC: coverage of quality services and financial protection for all. Priorities strategies and implementation plans for UHC will differ from one country to another. Enhanced and expanded monitoring of health under the Sustainable Development Goals (SDGs) should seek to build on that experience sharpening our focus on the key health service and financial protection interventions that underpin UHC. Effective UHC tracking is central to achieving the global goals for poverty alleviation and health improvement set by the World Bank Group and WHO. Without it policymakers and decision-takers cannot say exactly where they are or set a course for where they want to go. They cannot know whether they are focussing their efforts in the right areas or whether their efforts are making a difference. Monitoring is thus fundamental to the achievement of UHC objectives. It will also be vital to the realization of the SDGs. This report is a critical step to show how monitoring progress can be done telling us what the state of coverage of interventions and financial protection is and telling us where to focus most.