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Quantifying the Zero-Price Effect in the Field: Evidence from Swedish Prescription Drug Choices
Carey Business School, Johns Hopkins University, MD, Baltimore, United States.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE).ORCID iD: 0000-0003-4467-8676
Department for Development of Processes and Methods, Statistics Sweden, Solna strandväg 86, Solna, Sweden.
2022 (English)In: Journal of the association for consumer research, ISSN 2378-1815, E-ISSN 2378-1823, Vol. 7, no 2, p. 175-185Article in journal (Refereed) Published
Abstract [en]

We use Swedish data on consumer choices of therapeutically equivalent drugs to measure the zero-price effect. The Swedish benefit scheme for prescription drugs is a tier system, where each patient’s copay share is a step function of his/her qualified accumulated expenditure and can ultimately drop to zero. The copay tier a patient falls into is exogenously determined by his/her health and drug needs. In any given month, a patient pays the copay share of the lowest priced drug, plus the price difference between the chosen drug and the lowest priced drug in the same therapeutically equivalent exchange group. Therefore, when consumers cross the threshold of the zero-copay tier, the net price for the lowest priced drug will switch from a small positive amount to zero. This unique quasi-random environment allows us to apply the regression discontinuity design to quantify the zero-price effect. We do so for the full sample, as well as for two subsamples that should be less affected by state dependence. Based on a linear (quadratic) specification, the estimated zero-price effect reduces choice shares of the noncheapest alternatives by 12% (13%), 39% (48%), and 23% (25%) in the full sample, new diagnoses sample, and switchers sample, respectively.

Place, publisher, year, edition, pages
University of Chicago Press, 2022. Vol. 7, no 2, p. 175-185
National Category
Economics
Identifiers
URN: urn:nbn:se:umu:diva-193401DOI: 10.1086/718460ISI: 000843059600007Scopus ID: 2-s2.0-85126702448OAI: oai:DiVA.org:umu-193401DiVA, id: diva2:1648659
Funder
The Jan Wallander and Tom Hedelius FoundationTore Browaldhs stiftelse, 2016-0113:1Available from: 2022-03-31 Created: 2022-03-31 Last updated: 2023-09-05Bibliographically approved

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Granlund, David

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CiteExportLink to record
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  • apa
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