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Price Sensitivity and Substitution among Prescription Medications: Evidence from the Medicare Part D Donut Hole Closure (306648)
*Cameron Kaplan, University of Southern CaliforniaKeywords: Prescription Drugs, Medicare, Health Economics
Prescription drugs have been covered under Medicare Part D since 2006, and from 2006-2010, patients who were not eligible for low-income subsidies faced a large coverage gap (donut hole) where they were responsible for the full cost of medications after their spending on medications exceeded approximately $2500 per year. Following the passage of the ACA, the coverage gap began to partially close in 2011, starting with a 50% discount for brand-name drugs in the initial year. This closure led to a change in relative price difference between brand and generic drugs for prescriptions filled during the coverage gap. Using a 100% sample of Medicare claims data from 2006-2016. We examine the impact of the coverage gap closure on utilization of drugs in each therapeutic class using a difference-in-difference model comparing individuals who are enrolled in the low-income subsidy program (and do not face a coverage gap) to all others. We then use the results from these separate regressions to perform a meta-regression to examine factors associated drugs that experience larger vs. smaller price effects. Finally, we compare brand vs. generic utilization within class.