Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus
No 10-1:
Price Sensitivity of Demand for Prescription Drugs: Exploiting a Regression Kink Design
Marianne Simonsen, Lars Skipper ()
and Niels Skipper
Abstract: This paper investigates price sensitivity of demand for
prescription drugs using drug purchase records for at 20% random sample of
the Danish population. We identify price responsiveness by exploiting
exogenous variation in prices caused by kinked reimbursement schemes and
implement a regression kink design. Thus, within a unifying framework we
uncover price sensitivity for different subpopulations and types of drugs.
The results suggest low average price responsiveness with corresponding
price elasticities ranging from -0.08 to -0.25, implying that demand is
inelastic. Individuals with lower education and income are, however, more
responsive to the price. Also, essential drugs that prevent deterioration
in health and prolong life have lower associated average price
sensitivity.
Keywords: Prescription drugs; price; reimbursement schemes; regression kink design; (follow links to similar papers)
JEL-Codes: I11; I18; (follow links to similar papers)
49 pages, January 15, 2010
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