Moral Hazard in Drug Purchases

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10480

Classification and Topics

• Classification: Wirtschaft ; Health: General ; National Government Expenditures and Health ; Consumer Economics: Empirical Analysis
• Subject: prescription drugs ; moral hazard ; health insurance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Verho, Jouko ; Harju, Jarkko
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/279229
• Last update: 10.03.2025, 11:45 AM CET