On Utilization and Stockpiling of Prescription Drugs When Co-Payments Increase: Heterogeneity Across Types of Drugs

Aarhus University School of Economics Working Paper No. 2010-12

47 Pages Posted: 2 Sep 2010

Date Written: September 1, 2010

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.

Keywords: Prescription drugs, co-payments, price elasticities, stockpiling

JEL Classification: I11, I18

Suggested Citation

Skipper, Niels, On Utilization and Stockpiling of Prescription Drugs When Co-Payments Increase: Heterogeneity Across Types of Drugs (September 1, 2010). Aarhus University School of Economics Working Paper No. 2010-12. Available at SSRN: https://ssrn.com/abstract=1669992 or http://dx.doi.org/10.2139/ssrn.1669992

Niels Skipper (Contact Author)

Aarhus University ( email )

Nordre Ringgade 1
DK-8000 Aarhus C, 8000
Denmark

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