Cost-Sharing and Drug Pricing Strategies: Introducing Tiered Co-Payments in Reference Price Markets

Moritz Suppliet, Annika Herr

Research output: Working paperDiscussion paperOther research output

Abstract

Health insurances curb price insensitive behavior and moral hazard of insureds through different types of cost-sharing, such as tiered co-payments or
reference pricing. This paper evaluates the effect of newly introduced price limits below which drugs are exempt from co-payments on the pricing strategies
of drug manufacturers in reference price markets. We exploit quarterly data
on all prescription drugs under reference pricing available in Germany from
2007 to 2010. To identify causal effects, we use instruments that proxy regulation intensity. A difference-in-differences approach exploits the fact that
the exemption policy was introduced successively during this period. Our main
results first show that the new policy led generic firms to decrease prices by 5
percent on average, while brand-name firms increase prices by 7 percent after
the introduction. Second, sales increased for exempt products. Third, we find
evidence that differentiated health insurance coverage (public versus private)
explains the identifed market segmentation.
LanguageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages32
Volume2016-040
Publication statusPublished - 29 Sep 2016

Publication series

NameCentER Discussion Paper
Volume2016-040

Fingerprint

Copayments
Reference price
Pricing strategy
Cost sharing
Drugs
Health insurance
Pricing
Germany
Causal effect
Difference-in-differences
Prescription drugs
Brand names
Exemption
Moral hazard
Reference pricing
Market segmentation
Price limits

Keywords

  • pharmaceutical prices
  • cost-sharing
  • co-payments
  • reference pricing
  • regulation
  • firm behavior
  • health insurance

Cite this

Suppliet, M., & Herr, A. (2016). Cost-Sharing and Drug Pricing Strategies: Introducing Tiered Co-Payments in Reference Price Markets. (CentER Discussion Paper; Vol. 2016-040). Tilburg: Economics.
Suppliet, Moritz ; Herr, Annika. / Cost-Sharing and Drug Pricing Strategies : Introducing Tiered Co-Payments in Reference Price Markets. Tilburg : Economics, 2016. (CentER Discussion Paper).
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Suppliet, M & Herr, A 2016 'Cost-Sharing and Drug Pricing Strategies: Introducing Tiered Co-Payments in Reference Price Markets' CentER Discussion Paper, vol. 2016-040, Economics, Tilburg.

Cost-Sharing and Drug Pricing Strategies : Introducing Tiered Co-Payments in Reference Price Markets. / Suppliet, Moritz; Herr, Annika.

Tilburg : Economics, 2016. (CentER Discussion Paper; Vol. 2016-040).

Research output: Working paperDiscussion paperOther research output

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Suppliet M, Herr A. Cost-Sharing and Drug Pricing Strategies: Introducing Tiered Co-Payments in Reference Price Markets. Tilburg: Economics. 2016 Sep 29. (CentER Discussion Paper).