When discounts raise costs: The effect of copay coupons on generic utilization

Leemore Dafny, Christopher Ody, Matt Schmitt*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Scopus citations

Abstract

Branded pharmaceutical manufacturers frequently offer "copay coupons" that insulate consumers from cost- sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross- state and cross- consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending by $30 to $120 million per drug, or $700 million to $2.7 billion for our sample alone.

Original languageEnglish (US)
Pages (from-to)91-123
Number of pages33
JournalAmerican Economic Journal: Economic Policy
Volume9
Issue number2
DOIs
StatePublished - May 1 2017

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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