When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization
- (pp. 91-123)
Abstract
Branded pharmaceutical manufacturers frequently offer "copay coupons" that insulate consumers from cost-sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross-state and cross-consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending by $30 to $120 million per drug, or $700 million to $2.7 billion for our sample alone.Citation
Dafny, Leemore, Christopher Ody, and Matt Schmitt. 2017. "When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization." American Economic Journal: Economic Policy, 9 (2): 91-123. DOI: 10.1257/pol.20150588Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- I13 Health Insurance, Public and Private
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
- M31 Marketing
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