Unbiased Analysis of Today's Healthcare Issues

How does cost sharing affect drug utilization?

Written By: Jason Shafrin - Mar• 28•16

Any economist knows that if you raise the price of a good, demand goes down.  Thus, one should not be surprised to find numerous studies that show that increased cost sharing decreases drug utilization.  But how does drug utilzation decrease?  Is it along the extensive margin (i.e., the decision to initiate the drug) or along the intensive margin (i.e., the decision to continue using the drug once it is initiated)?

Doshi et al. (2016) conduct a systematic literature review  examining the effect of cost sharing on specialty drug use finds the following:

Findings varied by disease, but generally indicated stronger effects for noninitiation or abandonment of a prescription at the pharmacy and somewhat smaller effects for refill behavior and drug spending once patients initiated therapy. Studies have not examined specialty tier cost sharing seen under Medicare Part D or health insurance exchanges, nor effects on medical utilization, spending, or health outcomes. 

The winner appears to be the extensive margin, although the results do vary by disease.

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