Working Paper: NBER ID: w22745
Authors: Leemore Dafny; Christopher Ody; Matthew Schmitt
Abstract: Branded pharmaceutical manufacturers frequently offer "copay coupons'" that insulate consumers from cost-sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross-state and cross-consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending by $30 to $120 million per drug, or $700 million to $2.7 billion for our sample alone.
Keywords: Copay Coupons; Generic Drug Utilization; Pharmaceutical Spending
JEL Codes: I11; L40; L65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| copay coupons (I13) | branded drug sales (L65) |
| copay coupons (I13) | generic efficiency (D61) |
| generic efficiency (D61) | branded drug sales (L65) |
| copay coupons (I13) | total spending (H56) |
| branded drug sales (L65) | total spending (H56) |
| copay coupons (I13) | branded price growth (D49) |
| branded price growth (D49) | total spending (H56) |
| copay coupons (I13) | utilization of drugs with coupons (L42) |