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Discounts Shift the Demand Curve: Evidence from Li

Ashoka Economics Department Webinar | Bouke Teeselink (Yale)

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Abstract- Patients are often uncertain about the cost of medication until they arrive at the pharmacy to pick it up. The ultimate out-of-pocket cost for patients is sometimes reduced by copay cards: manufacturer-issued coupons sent to pharmacies, physicians, or patients. Using a data set containing transactions from ∼ 85% of US pharmacies, we find that copay cards increase pick-up rates of prescribed medications, even when the out-of-pocket price remains the same. In other words, copay card discounts not only increase consumption (by lowering price), they shift the entire demand curve (because a given price is less aversive when viewed as a discount).

 

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