Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 498: Compassion and cost: The dual role of reference pricing
Miyase Yesim Köksal ()
Additional contact information
Miyase Yesim Köksal: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: Providing health insurance involves a trade-off between the benefits from risk spreading and the costs due to moral hazard. Focusing on pharmaceuticals consumption, this paper examines theoretically whether reference pricing, requiring individuals to pay the price difference if, in this case, they don’t buy the cheaper parallel imported drug, can ease this trade-off – an issue which has not previously been pointed out in the debate on health insurance. The results indicate that, if individuals are extremely risk-averse, a policy shift from coinsurance to reference pricing would do this by providing more insurance while decreasing moral hazard.
Keywords: reference pricing; moral hazard; pharmaceuticals; parallel imports
36 pages, May 18, 2011
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