Pecuniary and non-pecuniary incentives in prescription pharmaceuticals: The case of statins

Frank Limbrock*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


Health insurance companies seek to influence the type of care patients receive in order to increase value in relation to cost. Traditional health insurance relies primarily on price mechanisms to affect patients' and doctors' choices, whereas managed care plans such as HMOs, as the name implies, affect choices directly thorough various forms of "managed care." I investigate the effect of pecuniary and non-pecuniary incentives used by health insurance companies to influence prescription decisions in an important class of pharmaceuticals, cholesterol-lowering drugs called Statins, using a discrete-choice demand model on patient-level data. My results suggest that HMOs are significantly more successful at influencing drug choice than traditional indemnity insurers. In conjunction with volume-contingent discounts given by drug producers, this could explain part of the cost-effectiveness differential between HMOs and traditional indemnity insurers.

Original languageEnglish (US)
Article number1
JournalB.E. Journal of Economic Analysis and Policy
Issue number2
StatePublished - Jan 1 2011


  • HMO
  • demand
  • managed care
  • pharmaceuticals
  • prescription drugs
  • statins

ASJC Scopus subject areas

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)


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