Discounts Shift the Demand Curve for Life-Saving Medications

29 Pages Posted: 17 Dec 2020

See all articles by Matthew Jordan

Matthew Jordan

Yale University

Bouke Klein Teeselink

Yale School of Management

Nicholas Adolph

IQVIA

Shane Frederick

Yale School of Management

Date Written: November 6, 2020

Abstract

Pharmaceutical pricing in the United States varies, and patients often do not know the out-of-pocket costs of their medications until arriving at the pharmacy to retrieve their prescriptions. In recent years, these pharmacy-counter interactions have seen the introduction of copay cards: manufacturer-issued coupons that are sent directly to pharmacies, physicians, and patients to reduce patient out-of-pocket costs. We exploit a unique data set containing transactions from ∼85 percent of all US pharmacies to estimate the causal effect of copay card discounts on pick-up rates of life-saving medications. Holding actual final price constant, we find that the presence of copay cards increases pick-up rates, providing evidence that discounts shift the demand curve itself.

Keywords: transaction utility, demand curve shift, consumer behavior, pharmaceuticals

JEL Classification: D01, D91, I12

Suggested Citation

Jordan, Matthew and Klein Teeselink, Bouke and Adolph, Nicholas and Frederick, Shane, Discounts Shift the Demand Curve for Life-Saving Medications (November 6, 2020). Available at SSRN: https://ssrn.com/abstract=3725906 or http://dx.doi.org/10.2139/ssrn.3725906

Matthew Jordan (Contact Author)

Yale University ( email )

New Haven, CT 06520
United States

Bouke Klein Teeselink

Yale School of Management ( email )

165 Whitney Ave
New Haven, CT 06511

Nicholas Adolph

IQVIA ( email )

Frankfurt
Germany

Shane Frederick

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
101
Abstract Views
829
rank
319,482
PlumX Metrics