Working Paper: NBER ID: w29735
Authors: Leemore Dafny; Kate Ho; Edward Kong
Abstract: We estimate the causal effects of drug copayment coupons, which reduce consumer cost-sharing for branded prescription drugs, on net-of-rebate price and quantities sold. Focusing on drugs without generic substitutes, we show that coupon introductions increase quantity sold by 23-25% for the commercial segment relative to Medicare Advantage, where coupons are banned. To quantify the resulting equilibrium price effects, we estimate a discrete choice model of demand for multiple sclerosis drugs and simulate a model of drug price negotiations. We estimate that net-of-rebate prices are 8% higher due to the availability of coupons for most of these drugs.
Keywords: copayment coupons; branded drugs; drug prices; quantities purchased
JEL Codes: I11; I13; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Copayment coupons (G52) | Net-of-rebate prices (D49) |
| Quantity of branded drugs sold (L65) | Net-of-rebate prices (D49) |
| Copayment coupons (G52) | Quantity of branded drugs sold (L65) |
| Copayment coupons (G52) | Demand for drugs (R22) |