ON THE DEMAND FOR PRESCRIPTION DRUGS: HETEROGENEITY IN PRICE RESPONSES

Authors


Correspondence to: Niels Skipper, Department of Economics and Business, Aarhus University, Bartholins Allé 10, Building 1323, 3, DK-8000 Aarhus, Denmark. Email: nskipper@econ.au.dk

ABSTRACT

This paper estimates the price elasticity of demand for prescription drugs using an exogenous shift in consumer co-payment caused by a reform in the Danish subsidy scheme for the general public. Using purchasing records for the entire Danish population, I show that the average price response for the most commonly used drug yields demand elasticities in the range of –0.36 to –0.5. The reform is shown to affect women, the elderly, and immigrants the most. Furthermore, this paper shows significant heterogeneity in the price response over different types of antibiotics, suggesting that the price elasticity of demand varies considerably even across relatively similar drugs. Copyright © 2012 John Wiley & Sons, Ltd.

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