More cost-sharing, less cost? Evidence on reference price drugs

Tuesday 2 October 2018, 2.00PM - 3.15pm

Speaker(s): Annika Herr, Düsseldorf Institute for Competition Economics (DICE), Heinrich Heine University

Abstract: This paper evaluates the causal effects of reference pricing on prices, copayments, and overall expenditures for off-patent pharmaceuticals. We use the quarterly data of the German market for anti-epileptics over four years at the package level and at the aggregate level. We exploit that the reference price has been adjusted in some of the active substances but not in others in a difference-in-differences framework.
At the product level, we find that a lower reference price reduces prices both for brand-name drugs and for generics, but leads to higher copayments, especially for brand-name drugs. At the aggregate level, we find that a lower reference price leads to savings on health insurance costs that come through three channels. First, lower reference prices steer the demand from brand-name products to generics. Second, brand-name firms' revenues decrease. Third, the patients bear a higher share of the costs, while overall cost are not affected.

Location: Alcuin A Block A019/20

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Maria Jose Aragon
Jessica Ochalek

CHE Seminar Programme

  • Thursday 6 December
    Professor Joanna Coast, University of Bristol