Compassion and Cost. The Dual Role of Reference Pricing
Abstract
Providing health insurance involves a trade-off between the benefits from risk spreading
and the costs due to moral hazard. Focusing on pharmaceuticals consumption, this paper
examines theoretically whether reference pricing, requiring individuals to pay the price
difference if, in this case, they don’t buy the cheaper parallel imported drug, can ease this
trade-off – an issue which has not previously been pointed out in the debate on health
insurance. The results indicate that, if individuals are extremely risk-averse, a policy shift from coinsurance to reference pricing would do this by providing more insurance while decreasing moral hazard.
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Date
2011-05Author
Köksal, Miyase Yesim
Keywords
reference pricing
moral hazard
pharmaceuticals
parallel imports
Publication type
report
ISSN
1403-2465
Series/Report no.
Working Papers in Economics
498
Language
eng