title: Do pharmaceutical prices respond to potential patient out-of-pocket expenses?
abstract: Despite the importance of patient insurance in the market for prescription pharmaceuticals, little is known about the impact of patient reimbursement on the pricing behavior of pharmaceutical firms. I examine the link between potential patient out-of-pocket expenses and pharmaceutical pricing using a unique policy experiment from Germany. Starting in 1989, a maximum reimbursement for a given medicine replaced a flat prescription fee. This change in reimbursement exposes the patient to the price of a prescribed product. Using a product-level panel data set covering several therapeutic categories before and after the policy change, I find that producers significantly decrease prices after the change in potential patient out-of-pocket expenses. Price declines are most pronounced for brand-name products. Moreover, branded products that face more generic competitors reduce prices more.
authors.affiliation: Dartmouth College, USA. nina.pavcnik@dartmouth.edu
authors.forename: Nina
authors.initials: N
authors.lastname: Pavenik
mesh_terms: D016527:Drug Costs; D004345:Drug Industry / Q000191:economics; D016568:Drugs, Generic / Q000191:economics; D004465:Economic Competition; D017850:Economics, Pharmaceutical / Q000639:trends; D005252:Fees, Pharmaceutical / Q000639:trends; D005382:Financing, Personal; D005544:Forecasting; D005858:Germany; D019981:Health Care Sector; D006801:Humans; D007356:Insurance, Pharmaceutical Services / Q000191:economics* / Q000639:trends; D018803:Models, Economic; D008962:Models, Theoretical; D011907:Rate Setting and Review / Q000639:trends; D014481:United States
chemical_list: D016568:Drugs, Generic