Price Elasticity and Medication Use: Cost Sharing Across Multiple Clinical Conditions

AUTHORS: Justin Gatwood, Teresa B. Gibson, Michael E. Chernew, Amanda M. Farr, Emily Vogtmann, A. Mark Fendrick



BACKGROUND:To address the impact that out-of-pocket prices may have on medication use, it is vital to understand how the demand for medications may be affected when patients are faced with changes in the price to acquire treatment and how price responsiveness differs across medication classes. 

OBJECTIVE: To examine the impact of cost-sharing changes on the demand for 8 classes of prescription medications.

METHODS: This was a retrospective database analysis of 11,550,363 commercially insured enrollees within the 2005-2009 MarketScan Database. Patient cost sharing, expressed as a price index for each medication class, was the main explanatory variable to examine the price elasticity of demand. Negative binomial fixed effect models were estimated to examine medication fills. The elasticity estimates reflect how use changes over time as a function of changes in copayments.

RESULTS: Model estimates revealed that price elasticity of demand ranged from -0.015 to -0.157 within the 8 categories of medications (P < 0.01 for 7 of 8 categories). The price elasticity of demand for smoking deterrents was largest (-0.157, P < 0.0001), while demand for antiplatelet agents was not responsive to price (P > 0.05).

CONCLUSIONS: The price elasticity of demand varied considerably by medication class, suggesting that the influence of cost sharing on medication use may be related to characteristics inherent to each medication class or underlying condition.

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