Price Sensitivity of Demand for Prescription Drugs: Exploiting a Kinked Reimbursement Scheme

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IZA Research Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 06.10.2009, 12:15 - 13:30

   

Presentation by 

Marianne Simonsen (Aarhus University)
   

Abstract:

This paper investigates price sensitivity of demand for prescription drugs using drug purchase records for at 20% random sample of the Danish population. We identify price responsiveness by exploiting exogenous variation in prices caused by kinked reimbursement schemes. Thus, within a unifying framework we uncover price sensitivity for different subpopulations and types of drugs. The results suggest low average price responsiveness with corresponding price elasticities ranging from -0.08 to -0.25. Individuals with lower education and income are, however, more responsive to the price. Also, essential drugs that prevent deterioration in health and prolong life have lower associated average price sensitivity.

   
   
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