1st Edition

Copayments and the Demand for Prescription Drugs

By Domenico Esposito Copyright 2006
    156 Pages 4 B/W Illustrations
    by Routledge

    154 Pages 4 B/W Illustrations
    by Routledge

    Increasing prescription drug cost-sharing by patients - in the form of increasing copayments - is one of the most striking, and controversial, developments in the health sector over recent years. The exact nature and use of copayments by health care insurers continues to be hot topic of debate.

    This detailed and meticulously researched study is one of the first of its kind: its results suggest that differences in copayments influence choice, shifting market share for these drugs. Differential copayments for medically equivalent alternatives is one strategy insurers use to affect the choice of one drug over another when faced with differing prices. Relative copayments for therapeutically equivalent drugs, imposed by insurers, are shown to have a significant impact on consumer choice – the implication being that physicians are acting in patients’ financial, as well as medical interest.

    Unlike much work in this area, Copayments and the Demand for Prescription Drugs is not sponsored by any drug company; and its up-to-date results, established on a firm scientific basis, are entirely unbiased. Its results have applications for the private insurance and pharmaceutical sectors as well as the public sector, and it will be of great interest to professionals and researchers in the fields of health economics, economic and healthcare policy-making, and microeconomics: its primary findings are especially critical to the United States public health sector which is on the cusp of providing a prescription drug benefit to nearly forty million elderly Americans.

    TABLE OF CONTENTS

    1. Introduction *

    1.1 Statins and Coronary Heart Disease *

    1.2 Organization *

    2. Literature on the Demand for Prescription Drugs *

    2.1 Prescription Drug Utilization *

    2.2 Prescription Drug Price Elasticity *

    3. Coronary Heart Disease & Statins *

    3.1 Serum Cholesterol and CHD Risk *

    3.2 Clinical Efficacy of Statins *

    3.2.1 Statins Effectively Reduce Risk for CHD *

    3.2.2 Comparative Efficacy of Statins in Modifying Cholesterol *

    3.2.3 Side Effect Profiles of the Statins *

    4. Economic Differentiation of Statins *

    4.1. Pricing *

    4.2. Advertising *

    4.3. Cost-Effectiveness *

    5. The Structure of Demand for Prescription Drugs *

    5.1 The Doctor-Patient Relationship *

    5.2 The Structure of Managed Insurance Drug Benefits *

    5.3 Patient Selection into Plans with Favorable Drug Coverage *

    6. The Economics of Drug Demand *

    6.1 Probabilistic Consumer Theory *

    6.2 The Random Utility Maximization Hypothesis *

    6.3 Aggregation of Preferences *

    7. Econometric Specification of Prescription Drug Choice *

    8. Data *

    8.1 Final Sample of Patients *

    8.2 Concerns with Retrospective Data *

    8.3 Analytical Variables *

    8.3.1 Statin of Choice *

    8.3.2 Statin Copayment *

    8.3.3 Insurance Type *

    8.3.4 Demographic Variables *

    8.3.5 Patient Health Status *

    8.3.6 Medical Utilization *

    8.3.7 Concurrent Lipid-Lowering Medication *

    9. Descriptive Statistics *

    9.1 Statin Treatment *

    9.2 Statin Copayments *

    9.3 Insurance Type *

    9.4 Demographic Variables *

    9.5 Patient Health Status *

    9.6 Medical Utilization *

    9.7 Concurrent Lipid-Lowering Medication *

    10. Multivariate Regression Results *

    10.1 Relative Copayments Influence Choice of a Statin *

    10.2 Insurers Affect Choice via Non-price Methods *

    10.3 Age, Gender and Region *

    10.4 Strong Association between Choice and Health Status *

    10.5 Summary of Main Multivariate Results *

    11. Multivariate Sensitivity Analyses *

    11.1 Patient’s CHD Status *

    11.2 Copayment Estimation *

    11.2.1 Averaging Copayments on a Monthly Basis *

    11.2.2 Visual Inspection of Copayments *

    11.3 Independence from Irrelevant Alternatives *

    12. Extensions *

    12.1 A Physician’s Point-of-View *

    12.2 To Switch or Not to Switch? *

    12.3 Panel Data Approach to Prescription Drug Demand *

    13. Discussion of Policy Implications & Conclusion *

    13.1 Bargaining in the Prescription Drug Market *

    13.2 A Medicare Prescription Drug Benefit *

    13.3 Conclusion *

    References *

    Appendix A: Statin National Drug Codes *

    Appendix B: The Charlson Comorbidity Index *

    Appendix C: Main Multivariate Regression Results *

    Appendix D: ICD-9 Codes of Interest *

    Appendix E: Multivariate Results--Health Status *

    Appendix F: Multivariate Results--Copayment Estimation *

    Appendix G: Mathematical Exposition from Chapter 6 *

    Choice Probability Assumptions *

    Assumptions imposed on *

    The Direct Utility Assumption *

    Properties of Indirect Utility *

    Biography

    Domenico Esposito