How Do Copayment Coupons Affect Branded Drug Prices and Quantities Purchased?
American Economic Journal: Economic Policy (Forthcoming)
We estimate the causal effects of drug copayment coupons, which reduce consumer costsharing
for branded prescription drugs, on net-of-rebate price and quantities sold. Focusing
on drugs without generic substitutes, we show that coupon introductions increase quantity
sold by 23–25% for the commercial segment relative to Medicare Advantage, where coupons
are banned. To quantify the resulting equilibrium price effects, we estimate a discrete
choice model of demand for multiple sclerosis drugs and simulate a model of drug price
negotiations. We estimate that net-of-rebate prices are 8% higher due to the availability of
coupons for most of these drugs.