Insurance Access and Demand Response: Pricing and Welfare Implications
We show that insurance coverage for prescription drugs can relax liquidity constraints, thereby permitting innovators to extract a large percentage of the value that their products create. As a result, consumers may be worse off with insurance, even in the absence of moral hazard. We show that this problem is exacerbated in a fragmented market and when regulations require the coupling of drug coverage with other medical coverage.
David Dranove, Craig Garthwaite, David Besanko
Dranove, David, Craig Garthwaite, and David Besanko. 2020. Insurance Access and Demand Response: Pricing and Welfare Implications.