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  5. How Do Copayment Coupons Affect Branded Drug Prices and Quantities Purchased?

How Do Copayment Coupons Affect Branded Drug Prices and Quantities Purchased?

  • Leemore Dafny
  • Kate Ho
  • Edward Kong
American Economic Journal: Economic Policy (Forthcoming)

Abstract

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.

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