Moral Hazard in Drug Purchases
CESifo, Munich, 2023
CESifo Working Paper No. 10480
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We study the moral hazard effects of the drug copayment threshold in Finland using detailed prescription drug purchase data. The analysis reveals that the average drug costs increase discontinuously by 17% at the threshold above which out-of-pocket drug costs decrease substantially. Our results suggest an average price elasticity of -0.17, which indicates evident moral hazard costs. Approximately 80% of the overall effect is due to individuals buying drugs in larger quantities rather than purchasing higher-priced drugs. The heterogeneity analysis suggests that the responses are largest for drug categories taken on an as-needed rather than a regular basis.
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